Turkish lira suffers turbulent fall after political interference in central bank

At the foreign exchange offices outside Istanbul’s Grand Bazaar, flashing red lights showed the turbulent Turkish lira moving, wildly fluctuating and plummeting to a new all-time low.

Some customers searching for US dollars were lining up in front of the Atlas Exchange and Gold store, hoping to catch the occasional moment when the lira broke its downtrend with a brief rally.

Others, with dollars to sell, awaited the Central Bank’s decision on interest rates to sell in the early afternoon. As expected, the monetary authority cut rates for the third time in a row, pushing the currency above 11 lira to the dollar for the first time.

Before and after the decision, the currency swung sharply, nearly 10% in a single day and weakening to 11.3 per dollar for the first time.

For merchants and market customers in the 15th century, the falling lira and 20% inflation contribute to raising the cost of living, with prices rising at a bewildering rate.

“We can’t make ends meet”Says grocer Mehmet Karadag. “Today we sell 10,000 today and tomorrow 20,000, but we cannot replace it. So we are really done. This is the situation in Turkey at the moment “.

The lira has lost a third of its value so far this year, most of it in the last two months, as the central bank, following the repeated insistence of President Tayyip Erdogan, lowered interest rates well below the inflation and accelerated the decline.

Erdogan claims that high rates drive inflation up, contrary to the opinion of most economists who believe otherwise.

The president says the lower rates should help companies borrow, invest and expand as it prepares for elections in mid-2023.

But opinion polls show a sharp drop in support for the man who has led Turkey for nearly two decades, as his ruling party, the AK, has gradually lost its reputation for economic management.

“Everything is very expensive, living conditions are increasingly difficult. We can no longer afford some luxuries”, afirmo Erkin Aytekin.

Muharrem Kilic, a 16-year-old student, said the future looked bleak and the bank was wrong to cut rates. “There will be price increases, one after another“, said.