The Turkish lira fell to its lowest level against the dollar amid continued uncertainty over the results of the presidential and parliamentary elections in mid-May, which could lead to the first political change in 20 years.
The currency fell to 19.5996 pounds per dollar, an unprecedented amount since the adoption of the new pound sterling in January 2005.
After the sharp fall in the value of the Turkish currency at the end of 2021, the government took steps to support it after it fell due to inflation and capital flight.
“It failed,” said Mike Harris of consulting firm Krebstone Strategic Macro. Although inflation has been steadily decelerating over the past 5 months, it was still at 50.51% y/y in March.
Contrary to traditional economic theories, Turkish President Recep Tayyip Erdogan believes that high interest rates contribute to inflation.
However, this monetary policy contributed to the fall of the Turkish lira and the rise in the cost of living.
Erdogan, who says he prefers growth and employment to price stability, said in late January that “inflation will quickly slow down” in his country to “30 percent in the coming months.”
Kemal Kilicdaroglu, Erdogan’s main opponent in the presidential election, promised that if he wins, he will work to restore the independence of the central bank.
The outgoing president’s economic losses have weakened his re-election bid, and recent opinion polls have given his main opponent a slight edge.
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