Turkish lira plunges 10% after Erdogan defends rate cuts
ABC News
The Turkish currency has weakened by nearly 10% against the U.S. dollar, a day after President Recep Tayyip Erdogan insisted there would be no turning back from his unconventional policy of cutting interest rates despite high inflation
ANKARA, Turkey -- The Turkish currency weakened by nearly 10% against the U.S. dollar Tuesday, a day after President Recep Tayyip Erdogan insisted there would be no turning back from his unconventional policy of cutting interest rates despite high inflation.
The lira plunged to a record low of 13.44 against the dollar before recovering some of its losses. It was trading at 12.51 against the dollar in the late afternoon — down 9.9% from Monday’s close. The currency was trading at 14.08 against the euro. The lira has lost some 40% of its value since the start of the year.
Erdogan, who had declared himself an “enemy” of high borrowing costs, portrayed his economic policies as “an economic war of independence” during a late-night televised address to the nation. He made clear that his government would not step back from its policy of lowering borrowing rates to boost growth.
Contrary to traditional economic theory, Erdogan argues that high interest rates cause inflation. Typically, central banks raise those rates to tame rising consumer prices.
