Turkish Lira collapses to historic low against U.S. Dollar, Erdogan still voicing support for interest rate cuts

ANKARA — Despite the accelerating collapse of the Turkish Lira against the U.S. Dollar, briefly crossing 11:1 and dropping slightly below that at the time this article was written, the Central Bank of the Republic of Turkey (CBRT) cut the policy rate by 100 basis points to 15.00%.

Yesterday, Turkish President Recep Tayyip Erdogan publicly stated he will continue fighting for interest rate cuts, sending a clear signal to investors the day before the central bank set its policy.

Bloomberg reported that Erdogan claimed the government would lift the burden of interest rates on citizens, reiterating his unconventional slogan that high borrowing costs are the cause of inflation.

According to an average estimate in a Bloomberg poll of 21 analysts, under pressure from Erdogan’s demands to reduce borrowing costs, the monetary authority has lowered its key interest rate by 300 basis points to 16% in two consecutive and unexpected moves since September, hurting the currency, and fueling inflation.

Analysts at FXStreet have forecast that the Lira will drop to “12.90 by end-Q3 2023 … 14.50 in 2024 and 17.00 in 2025.”