The Turkish lira lost significant gains against the dollar on Monday, and fell 15 percent in its value. The currency is thus at almost a record low. Last week, Turkey’s central bank raised its policy interest rate from 17 to 19 percent, after which President Recep Tayyip Erdogan fired the bank’s president.
Analysts had already announced this weekend that they were expecting a depreciation of the lira. The head of the central bank who was recently fired, Naji Aghbal, was appointed five months ago to restore confidence in the lira. The fact that it will be rejected so quickly does not help the currency’s reputation.
Erdogan is known not to be a fan of raising prices. He believes that these high interest rates are the reason for the high inflation in Turkey, which is currently more than 15 percent.
Jibal argued exactly the opposite. According to him, raising interest rates was a way to lower inflation. This difference of opinion led to his dismissal at night from Friday to Saturday.
This is the third time in a year and a half that Erdogan has fired the head of the central bank. Analysts are warning Europe of the consequences of the country’s instability.
“Turkey is an important trading partner of the European Union,” IMF Director Timothy Ashe told NU.nl this weekend. “European banks like BNP Paribas, Santander and BBVA have big interests in the Turkish banking system, which means that problems in Turkey can have major repercussions elsewhere. You can also be sure that Dutch pension funds have large investments in Turkish bonds. : Nobody is benefiting, with the political and economic instability that seems to be coming.