New low lira after Erdogan reference: ‘Reducing interest rates on Islamic regulation’ | Financial

The lira weakened more than 6 percent against the dollar. That marked the fifth day in a row that the currency lost value. In the past three months, the lira has lost 50 percent of its value.

“What it is? We are lowering the interest. Don’t expect anything else from me,” Erdogan told television on Sunday. “As a Muslim, I will continue to do what is required.” In doing so, Erdogan used an Arabic word used in Turkish to refer to Islamic teachings. It is the second time in a month that Erdogan has invoked religion to justify the current monetary stance.

Inflation in Turkey is very high, but under pressure from Erdogan, the central bank has cut interest rates repeatedly since September. Erdogan prefers to see interest rates as low as possible because he believes that high interest rates lead to higher prices. The usual policy of economists is to raise interest rates to curb inflation. The largest corporate lobby in Turkey has already called on the president to stop his controversial interest rate policy because it is causing major damage to the economy.

—