Roundup: As Turkey's president defends lower interest rates, lira tanks again

2021-11-23 15:35:49 GMT2021-11-23 23:35:49(Beijing Time) Xinhua English

ANKARA, Nov. 23 (Xinhua) -- Turkish President Recep Tayyip Erdogan on Monday defended the policy of lower interest rates to fight rising inflation, prompting the embattled national currency to dip to new historic lows against the U.S. dollar.

Turkey is committed to engaging towards "the right thing for our country" with an economic policy that is "focused on investment, production, employment and exports" instead of the "vicious circle of interest rates," Erdogan said after a cabinet meeting.

As the Turkish leader spoke about the economic policy, the lira witnessed a sharp loss of 2.1 percent against the greenback, slipping to a new record low of 11.49 per U.S. dollar.

The lira was also down by 1.7 percent against the euro at 12.92, a historic low too.

While Erdogan defended the central bank's decision to lower the benchmark interest rate by 400 basis points to 15 percent, the inflation rate is nearly 20 percent annually, well below the policy rate.

Inflation is chronic in Turkey since the 1980s, and the COVID-19 pandemic exacerbated Turkey's economic and financial woes amid rising prices which are badly affecting households.

Erdogan also blamed the lira weakness on the "ploys," which he said were being played on foreign exchange and interest rates. "We are welcoming the low rates policy," Erdogan stressed, accusing "opportunists" of making excessive-high prices.

The president defended his policies by saying that, in contrast to the past, many people now have sizeable amounts of foreign currency, and fewer Turkish companies now have loans in foreign currency.

"We will win this economic war of liberation," he insisted.

The lira has shed a third of its value since the start of this year and worries seem far from over, as analysts are predicting another rate cut of 100 basis points by the central bank in December, in line with the president's belief that higher interest rates result in higher prices.

The lira has been one of the worst performers among emerging markets in recent years. In 2018, it had lost 25 percent of its value in a diplomatic crisis with the United States.

Turkey's currency devaluation has raised the cost of living in the country which is reliant on imported oil and gas. The increase in global energy prices has driven up Turkey's energy bill.

Erdogan hopes that a double-digit growth rate fueled by credit and record exports will help consolidate his power until the next presidential and legislative elections scheduled for June 2023.

The economy and the government's economic management are the two basic issues in the eyes of voters, according to surveys.

Some 76 percent of respondents in a recent survey conducted by MetroPoll company, one of the major survey companies in Turkey, thought that the economy is worsening, while only 17 percent believed that Turkey is heading for better prospects. Enditem