The Finance Associated Press (Shanghai, Editor Zhao Hao), on Friday (December 17), the Turkish Central Bank once again intervened in the foreign exchange market, intervening in the foreign exchange market for the fifth time this month. Prior to this, the Central Bank of Turkey intervened in the foreign exchange market four times on the 1st, 3rd, 10th, and 13th of this month.
After the intervention of the Central Bank of Turkey, the exchange rate of the Turkish lira against the U.S. dollar fell below 17. Since the beginning of this year, the Turkish lira has depreciated about 55% against the U.S. dollar.
(U.S. dollar vs. Turkish lira source: Tradingview) The main reason for the lira’s plunge is due to the central bank’s repeated interest rate cuts. Yesterday, the Central Bank of Turkey held a meeting of the Monetary Policy Committee and announced that it would lower the benchmark interest rate by 100 basis points to 14%. Since September this year, the Central Bank of Turkey has cut its benchmark interest rate by 500 basis points.
(Turkish central bank interest rate) But while the Turkish central bank stopped the currency from falling, the stock and bond markets naturally suffered. The yield on Turkish 10-year government bonds rose to 21.26%, the highest level since 2010.
As of press time, the Turkish stock market Istanbul 100 Index fell 7%, and the Istanbul Stock Exchange’s circuit breaker mechanism was triggered for the second time in a day-the stock market, stock and stock index futures derivatives market, and bond repurchase market were temporarily suspended.
Turkish President Erdogan has publicly stated on many occasions that he will continue to implement the interest rate cut policy. Unlike mainstream economics, Erdogan believes that high interest rates are the cause of inflation.
After many interest rate cuts, the Turkish lira has depreciated sharply this year, and the inflation rate has also remained high. Turkey’s Consumer Price Index (CPI) in November rose 21.31% from the same period last year.
Yesterday, Erdogan announced that Turkey’s monthly minimum wage in 2022 will be 4,253 lire. Calculated according to the Turkish currency lira, Turkey’s monthly minimum wage in 2022 has been raised by approximately 50% compared to the monthly minimum wage in 2021.
Turkey’s Minister of Labor and Social Security Bilgin said that Turkey’s monthly minimum wage is related to the livelihoods of 6.9 million Turkish employees.
In 2021, the monthly minimum wage in Turkey is 2826 lire. Based on the exchange rate at the beginning of 2021, this is equivalent to approximately US$380. But now with the depreciation of the lira, 2826 lira is only equivalent to about 185 US dollars.
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