At a new all-time low, close to 11 pounds against the dollar, the Turkish currency formed in the morning trading, in view of the meeting of the central bank, which is expected to further reduce interest rates despite the fact that the currency is falling sharply and inflation remains close to 20%.
The pound is at 10.85 against the dollar, while it had reached 10.98 against the US currency earlier, almost 9% lower than last Friday.
The decision of the central bank is expected at 2 at noon. Estimates speak of a reduction of 100 basis points, to 15%.
The fall in the currency in recent weeks amid worries about further monetary easing was exacerbated on Wednesday by President Erdogan, who said he would continue his battle against interest rates “until the end”.
Erdogan’s insistence on lowering interest rates and frequent changes in central bank leadership, partly due to policy disagreements, have severely damaged the central bank’s credibility over the years, hitting the pound.
The central bank, which says price pressures are temporary, began sending strong signals in September and went on a relaxing cycle later that month.
Since then, it has reduced the interest rate by 300 basis points to 16%.
Aggressive relaxation has shattered any expectations and left Turkey virtually alone in a world of political turmoil.
“Even if interest rates remain unchanged (or increase), only short-term currency relief can be given, as it will depend on the president’s reaction and whether he decides to fire another central bank governor,” said a Capital Economics analyst.
He added that “it is clear from a purely macroeconomic perspective what the monetary policy committee should do during today’s meeting (ie raise interest rates aggressively to support capital flows and the currency), but there is enormous uncertainty.” for what exactly he will do ”.
The pound has lost more than 32% of its value since the beginning of the year, and has lost more than 65% in the last three years.
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