Source: Dubai – Mr. Mohammed
With the mounting pressure on the Turkish lira and its fall to unprecedented levels, a group of global research houses warned monetary policy makers against continuous intervention in the currency market to support the collapsing lira against the dollar, which caused a severe drain on foreign reserves, noting that the only thing that might support the lira During the coming period, it is to change that policy and raise interest rates to avoid the state’s continuous operations in the market.
A research note issued by Barclays, quoted by the US CNBC network, excerpts from it, said that the Turkish Central Bank will have to continue with the policy of raising interest, which is contrary to the desire of Turkish President Recep Tayyip Erdogan, who described high interest rates on more than one occasion as “evil.” And demanding monetary policy makers in his country to reduce it.
The memo added, “The only option appears to be more interest rate hikes to stop the currency drain, which may not remain sufficient to support the lira, but it is a step that must be taken immediately.”
The Turkish Central Bank meets on October 22 to determine the interest rate decision after raising it at the last meeting by about 150 basis points to levels of 11.5%, a step that failed to pull the pound out of the sharp decline against the dollar as it approaches 8 lira levels per dollar, which is a record level. It has not been registered before.
Analysts told the American Network, that one of the most important reasons for the decline of the lira is the continuous interference by Erdogan in the decisions of the central, which has largely caused the wave of decline since the beginning of the year, as investors believe that the Turkish Central Bank does not have the freedom to make its decision, which led to a wave An exodus of foreign investors ’money since the beginning of the year, with the lira losing more than a third of its value against the green currency.
Capital Economics said in a recent research note: “The Turkish lira has been one of the worst performing currencies in emerging markets since the beginning of this year against the US dollar in conjunction with the economic collapse caused by the Corona pandemic. And with the fact that Turkey is a net importer of energy and at a time when the currencies of the markets were Emerging countries are showing some signs of recovering from the pandemic. The Turkish lira was continuing its downward trend against the US dollar.
After a violent sell-off in the Turkish lira in the summer of 2018, the Turkish central bank succeeded at that time in restoring stability to the currency market through a sharp increase in interest rates, which made the weak lira attractive at the time for investors, but the matter did not like Turkish President Recep Erdogan, who was The bank is constantly calling for reducing interest rates to encourage investment.
But the bank’s governor at the time, Murat Cetinakia, did not yield to Erdogan’s request until the Turkish president dismissed him in July of last year and appointed Murad Kaya, the current governor, who reduced interest rates within 10 months from levels of about 24% to about 8.75% until the end of last May before he It gradually raised it again to the current level with the dwindling options available to it to stop the decline of the pound against the dollar and the depletion of decimated foreign reserves.
The Turkish economy is groaning in the midst of the Corona pandemic, with an almost complete halt of tourism and a steady rise in unemployment rates, which have now reached about 14% and a jump in inflation rates to about 11% with the decline in the purchasing power of the currency.