Summary: Turkey’s lira continues to decline despite interest rate hikes. The lira traded at a near record low against the US dollar, with a decline of about 30% for 2023. President Erdogan’s new economic team has allowed the lira to depreciate as part of efforts to restore rational economic policies. However, with high inflation rates, real interest rates remain deeply negative.
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In Turkey, the lira continues to face significant challenges as it reaches near record lows against the US dollar. Despite a series of interest rate hikes, the currency’s decline for 2023 stands at around 30%. President Erdogan’s new economic team, appointed after his re-election, has allowed the lira to depreciate as part of their efforts to restore rational economic policies. However, inflation rates remain high, resulting in deeply negative real interest rates.
The Challenges of Interest Rate Hikes
Although Turkey’s central bank has raised interest rates from 8.5% to 30%, the currency’s decline persists. The high inflation rate, running at nearly 60%, means that even with these rate hikes, real interest rates remain deeply negative. This poses a significant challenge for the country’s economy and the efforts to stabilize the lira.
New Economic Team’s Approach
President Erdogan’s new economic team aims to restore rational economic policies in Turkey. The decision to allow the lira to depreciate sharply is part of this broader effort. By taking this approach, they hope to address the economic challenges and create a more stable economic environment for the country.
It is important to note that the lira’s decline is a complex issue influenced by various factors, including global economic conditions and market dynamics. The new economic team’s actions are aimed at finding a balance and implementing measures to restore stability.