Saturday, November 27th, 2021
Investigation after the Lira crash
Erdogan senses price manipulation
The Turkish president continues to grapple with the pitfalls of the economy. Because Erdogan believes that high interest rates cause high inflation and force the central bank to cut, investors are keeping their capital safe. Now the “manipulators” are to be tracked down.
After the repeated losses of the Turkish lira on the foreign exchange markets, President Recep Tayyip Erdogan orders an investigation into exchange rate manipulation. Erdogan had commissioned a supervisory body subordinate to him with the investigation, reported the official news agency Anadolu. The auditors are supposed to identify institutions that have bought foreign currency on a large scale and investigate whether the forex trading has been manipulated. The lira has depreciated by around 45 percent since the beginning of the year. The downward slide had accelerated in the past two weeks.
After a speech by Erdogan, in which he defended the rate cut by the central bank to 15 percent, the lira had hit a record low against the dollar. At times, up to 13.45 lira were paid in the markets for one dollar. Despite an inflation rate of almost 20 percent, Erdogan has repeatedly put pressure on the central bank by demanding interest rate cuts. He had said he would not allow the population to be crushed by high interest rates.
Low incomes are particularly burdened
Economists in Turkey also criticize the interest rate cuts and instead call for interest rate increases to counteract the trend. Companies are warning of economic difficulties caused by the collapse of the lira, which is making imports significantly more expensive and thus fueling inflation. This development is particularly affecting consumers with low incomes.
The Turkish central bank had recently lowered the key interest rate to 15 percent – contrary to the common practice of countering high inflation by raising the key interest rate. Erdogan, on the other hand, believes that high interest rates cause high inflation. Critics also complain that President Erdogan is exerting influence on the central bank. He has already changed leadership several times in the recent past.