Traders ask Erdogan to reconsider his monetary policy
Turkish lira’s continued depreciation, on Monday, prompted usually cautious traders to break their silence to demand President Recep Tayyip Erdogan to reconsider his monetary policy.
With Erdogan’s determination to continue calling for lower interest rates, the Turkish Businessmen Association, which represents about 85 percent of export companies, called on him to correct the monetary policy that is pushing the economy and the country toward the abyss.
The lira continues to decline to record levels, and the exchange rate reached 18 pounds to the dollar, to lose more than 45 percent of its value against the dollar since the beginning of November.
The Turkish lira fell again on Monday morning and lost more than 8.5 percent of its value against the dollar, prompting the authorities to suspend trading on the stock exchange in the afternoon, for the second time since Friday.
The new decline of the local currency comes a day after the head of state’s statements were published on Sunday evening, in which he confirmed that he would not raise interest rates in order to stabilize the exchange rate. Erdogan attributed his decision to the teachings of Islam, and said: “As a Muslim, I will do what our religion commands me” and “God willing, inflation will come down as soon as possible.”
Thus, Erdogan has responded to the Turkish Businessmen Association, which appealed to him at the end of last week to move to confront the crisis.
“The policy choices that have been implemented have not only created new difficulties for the business world, but also for our citizens,” the exporters’ association wrote in a statement posted online. And she warned again, “of the risk of a significant depreciation of the lira, accelerating inflation, pressure on investments, growth and employment, and impoverishment of our country.” “Given this, it is necessary to assess the damage to the economy and return to the economic principles that were established within the framework of a market economy,” she added.
In response to this call, Erdogan recorded the video that was broadcast on Sunday evening, in which he said, “They are complaining about the interest rate cut. But don’t expect anything else from me.
As the president presses the central bank, which has fired three of its governors since 2019, to cut its interest rate, currently at 14 percent, the annual inflation rate has reached 21 percent and could reach 30 percent in the coming months, according to economists.
But the opposition accuses the National Statistics Office of deliberately minimizing the price increase, seeing the prices of basic commodities such as sunflower oil rise by 50 percent in a year.
Turks seek to exchange their local currency for dollars and gold in order to preserve their purchasing power. The Businessmen Organization indicated that it denounced “the loss of confidence and the unstable environment”, stressing that “the huge demand for foreign currencies impedes all economic balances.”
Pictures were widely circulated and recently commented on in Turkey, showing long queues in front of bread warehouses supported by opposition municipalities, in Ankara and Istanbul in particular, where bread is sold at half the market price.
In this context, the president on Thursday raised the minimum wage by 50 percent to 4,250 liras (240 euros) from next year.
Turkish lira rebounded Monday evening after President Recep Tayyip Erdogan announced new monetary support measures that analysts interpreted as an indirect rate hike.
The Turkish lira rose by about 10% on Monday evening, after the new measures were announced, exceeding a loss of about 10% of its value that it had previously suffered during the day.
Analysts said that Erdogan succumbed to market pressures and indirectly raised interest rates as he announced a series of complex measures to save the national currency.
These measures include a new financial instrument aimed at offsetting the decline in the value of bank deposits caused by the depreciation of the lira.
Erdogan did not explain how the tool would work. But the former adviser to the Turkish treasury, Mahvi Egelmaz, described the new measures as an “indirect hike in interest rates.”
In view of Erdogan’s determination to continue calling for lower interest rates, the Turkish Businessmen Association, which represents about 85% of export companies, called on him to correct the monetary policy that is pushing the economy and the country toward the abyss.
The continued depreciation of the Turkish lira on Monday prompted usually cautious traders to break their silence to demand Erdogan reconsider his monetary policy.
