LAST UPDATE 11:57
The Turkish pound hit a new low against the dollar, following a speech by Turkish President Recep Tayyip Erdogan, who reiterated the country’s need to continue lowering interest rates.
The pound traded at 17.41 against the dollar, at a new all-time low after falling last week, and following a 14% drop in central bank interest rates from 15%.
Erdogan reiterated on Sunday that he would not allow Turkey to be “crushed by interest rates”, adding that “God willing, inflation will be reduced as soon as possible.”
The pound has also fallen 134% since the beginning of the year, causing rising costs for imports, fuel and basic necessities.
The Turkish pound hit a new low despite central bank interventions of $ 6 billion this month as President Erdogan insisted on an unorthodox policy of low interest rates, referring to the Islamic doctrine of usury.
The Turkish president’s initiative to cut interest rates by 500 basis points since September has sparked the country’s worst monetary crisis in two decades, with the pound falling 35% in the last 30 days.
Erdogan defended his economic policy on Sunday, likening currency instability to attacks on the country’s economy rooted in the 2013 demonstrations in Turkey, which began in Gezi Park in Istanbul.
“We are lowering interest rates. Do not expect anything else from me. As a Muslim, I will continue to do what Islamic teaching requires,” he said, referring to the Islamic belief that high interest rates or usury are usually avoided.
Despite widespread criticism and rapid impact on the economy, combined with rapidly eroding Turkish incomes and savings, Erdogan has embarked on his so-called new economic program, which prioritizes exports and lending.
Under pressure from Erdogan, the central bank cut interest rates again last week by 100 basis points, sending real interest rates even deeper into negative territory.
Inflation jumped to 21% last month and is expected to pass 30% next year.
Economists and opposition lawmakers say the rapid monetary easing is reckless and has pushed up import prices.
In an effort to slow the sell-off of the pound, the central bank intervened five times this month.
Bankers’ estimates show that it has sold more than $ 6 billion of its already depleted foreign exchange reserves.
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