Turkish lira-dollar exchange rate dives after Erdogan calls for lower interest rates

Turkish
President Recep Tayyip Erdogan makes a speech during a ceremony
marking the second anniversary of the attempted coup at the
Presidential Palace in Ankara, Turkey, July 15,
2018.

REUTERS/Umit
Bektas

• Turkish President Recep Erdogan on Thursday said interest
  rates are a “tool of exploitation” and called for low interest
  rates.
• The Turkish central bank makes an interest rate decision
  today. It is meant to be independent but has been coming under
  increasing pressure from Erdogan.
• Analysts say Turkey needs to raise interest rates to combat
  inflation, which is running at 16%.
• Erdogan’s comments sent the Turkish
  lira down by as much as 3% against the US dollar.
• Follow
  the Turkish lira in real time here.

The lira is tumbling against the US dollar on Thursday
morning after Turkish President Recep Erdogan called for lower
interest rates, just hours before the central bank is due to make
a decision.

The lira fell by 3% to 6.5225 per dollar as of 10.47 a.m.
GMT (5.47 a.m. ET). It has since pared some of its losses and is
down
about 1.6% as of 11.15 a.m. GMT (6.15 a.m. ET).

Erdogan, who has called interest rates “evil”, said
during a meeting in Ankara that he remains opposed to
high-interest rates. He added that the Turkish central bank
is independent and will make its own decision. The bank is due to
publish its latest decision later Thursday and investors are
hoping for an increase in rates.

Analysts have called for Turkey to hike its key interest rate by
as much as 10% to combat inflation, which is running at 16%.

The lira collapsed against the dollar last month amid
concerns about Erdogan’s growing control over monetary policy in
Turkey and a dispute with the US that led to sanctions. 

Erdogan earlier this year described interest rates as “the
mother and father of all evil,” and he has recently been
exerting ever greater influence over Turkey’s central bank. Last
year, against conventional wisdom, he argued that high
interest rates actually cause inflation. 

On Thursday, he
dubbed interest rates a “tool of exploitation.”

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