Turkish lira hits new record lows after raising interest rates

Turkish lira fell by as much as 2.8 percent and hit a new record low early Friday morning, continuing to incur losses after the central bank raised interest rates on Thursday, reversing President Recep Tayyip Erdogan’s policy, in an increase that was less than expectations.

According to Reuters, the lira reached 25.2015 in its latest transactions, which is about 1.3 percent weaker than Thursday’s closing. And when the currency hit a low of 25.59, it was almost 27 percent weaker against the greenback this year.

The Turkish Central Bank raised the basic interest rate by 650 basis points to 15 percent and said in its first meeting under its new president, Hafiza Ghaya Arkan, who was appointed by Erdogan after winning the elections last month, that he would go further than that.

The move represented a change of course after years of monetary easing in which the rate of one-week repo agreements fell to 8.5% from 19% in 2021 in an unorthodox policy pursued despite high inflation. ,

The median forecast in a Reuters poll was for a rate hike to 21 percent, and analysts said that the lower-than-expected hike indicates that Arkan may not have much freedom to confront inflation strongly under Erdogan’s supervision.