Who knows if the new, thunderous thud of the Turkish lira will please Erdogan. The president has long been engaged in a battle against what he calls speculators and “acrobats of global finance”, that is, international investors, and has never batted an eyelid at the devaluation of the national currency in the name of supporting export competitiveness. .
The object of the dispute is the monetary policy of the Turkish central bank, which according to the “Sultan” must be as expansive as possible to encourage economic growth and employment. It matters little if inflation has been around 20% for some time and therefore any central bank would try to curb it with a tightening on the cost of money. The governors who tried to do so have been sacked, the one currently in office seems to comply with the president’s diktats, so much so that since September he has cut the cost of money by 400 basis points, the last time last week, bringing it to 15 per hundred.
The decision, although expected by the market, was met with massive sales on the national currency, which slipped to an all-time low of 11 against the dollar. It was not enough: on Monday evening Erdogan spoke on the issue, claiming the correctness of the Central Bank’s moves. Turkey, he said, is engaged in “an economic war of independence”. “We had to choose between giving up investment, manufacturing, growth and jobs or taking on a historic challenge to meet our priorities,” he added. Rate cuts are therefore welcome, with all due respect to the international Cassandras.
The sword defense of the counterintuitive policy of the Central Bank triggered yet another wave of sales on the Turkish lira, which today, in a few hours, lost up to 8% on the dollar to a minimum of 12.48 and a suffer similar declines against the euro down to an intraday low of 14.06. Since the beginning of 2021, the lira has already lost 40% against the dollar. A Caporetto, which will inevitably bring new inflation through the import channel and make the already weakened purchasing power of the population slide further. The president, however, does not give up and indeed, according to market rumors, he could soon replace the finance minister Lutfi Elvan with a figure more faithful to his dictates.
The appeals to return to a less risky monetary policy are of little use: like that of the former vice president of the Central Bank Semih Tumen, torpedoed last month, who wrote on twitter what many analysts share: “This irrational experiment without the possibility of success – he wrote – must be abandoned immediately, we must return to policies that protect the value of the Turkish lira and the prosperity of citizens ».