The Turkish lira hit new record lows against the dollar and the euro on Friday, October 15, as investors worried about further interest rate cuts despite rising inflation, after President Recep Tayyip Erdogan fired three members of the central bank’s monetary policy committee.
The lira fell about 0.9% today, to its lowest level ever at 9.28 against the dollar.
The lira has lost more than 19% of its value so far this year.
The lira also touched the level of 10.7235 against the euro.
“These frequent reshuffles of central bank decision-making committee members underscore the message that Turkey’s central bank is not independent and is under enormous political pressure,” said Silva Demiralp, director of the Koç University Economic Research Forum and former US Federal Reserve economist.
She added that the lack of credibility worries the markets because achieving the central bank’s inflation target of 5% will likely be more difficult, and also because any increase in the interest rate in the future will be less effective.
Two of the three MPC members who were dismissed were seen as opposing a 100 basis point rate cut to 18% last month, and their dismissals were seen as a prelude to further monetary policy easing next week at the earliest.
Analysts saw the move as further evidence of political interference by Erdogan, who has previously described himself as an enemy of interest rates and often urges monetary stimulus.