Hours after being sworn in, Erdogan announced that Mehmet Simsek, a former Merrill Lynch banker who had previously served as his finance minister and deputy prime minister, would return to the Cabinet after a five-year break from politics. “Pressure over the lira had been high for some time, but excessive interventions by the central bank was preventing" the currency from skyrocketing in recent weeks or months, said Ozlem Derici Sengul, an economist at the Istanbul Spinn Consultancy. In other policy considered to be unorthodox, economists say the government aggressively intervened in the markets to prop up the lira ahead of the elections, depleting Turkey’s foreign currency reserves to keep the exchange rate under control. Inflation eased to 39.5% last month, according to official figures, but an independent group says the true number is more than double that. The bank has cut its key policy rate from around 19% in 2021 to 8.5% now, even as inflation hit a staggering 85% last year. Turkey has been plagued by a currency crisis and skyrocketing inflation since 2021, which economists say are the result of Erdogan’s unorthodox belief that raising interest rates will increase inflation.Ĭonventional economic thinking - and the approach being taken by central banks around the world - calls for the opposite: rate hikes to control price spikes.Įrdogan has exerted pressure on Turkey’s central bank to lower borrowing costs.
Here’s a look at the falling value of the lira, what lies ahead for the economy and how people have been affected: Soon my income won’t pay the rent,” said Sureyya Usta, a 63-year-old who lives in Ankara.
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