Istanbul, May 26 (BNA): The Turkish lira fell on Thursday to its weakest level since December ahead of the central bank meeting in which it is expected to maintain the benchmark interest rate at 14% despite high inflation, depleted foreign exchange reserves and a prolonged decline in the currency. .
The lira has fallen nearly 20 percent this year, on top of the 44 percent it lost last year, largely due to a currency crisis in December triggered by a series of unconventional interest rate cuts in the second half of 2021, Reuters reported.
The currency was at 16.46 against the dollar in early trading and settled at 16.3950 at 0704 GMT, down 0.3% from Wednesday’s close.
And 15 economists polled by Reuters had predicted that the bank would keep interest rates later on Thursday. Some speculated that he would have to raise prices before the end of the year in light of the continued pressure on the lira, rising prices and tightening other central banks.
President Recep Tayyip Erdogan urged monetary easing to boost credit and exports and reverse Turkey’s chronic current account deficit. However, the deficit only increased due to higher energy costs and imports.
Rising prices after years of double-digit inflation have shaken families and eroded Turks’ savings. Led by energy and food prices, inflation reached a two-decade high of 70 percent last month and is expected to rise further as the lira weakens.
“The central bank is not really free to raise interest rates. In fact, had it not been for the continued depreciation pressure on the lira exchange rate, they (the bank) might have lowered the rate,” Commerzbank said in a note. .
“We hold our view that the real interest rate in Turkey remains extremely negative; the next big move in the US dollar against the Turkish lira is approaching.”