Published: October 9, 2023 9:51 am
Author: RT
The currency continues to plunge amid record inflation despite several rate hikes by the central bank
The Turkish currency continued to decline on Monday, falling below 28 lira against the US dollar, marking the lowest level on record. The currency is down more than 50% against the greenback so far this year.
In September, the Turkish central bank increased the key interest rate by 500 basis points to 30%. The move marked a fourth straight hike aimed at tackling high inflation as part of a broader policy U-turn.
In August, the regulator refused to inject more foreign-exchange reserves to buoy the domestic currency and manage the exchange rate. The decision to ease regulatory requirements in the banking industry inevitably sent the lira plummeting.
Türkiye spent some $200 billion to support the national currency in the 18 months through August, depleting reserves as it kept interest rates artificially low.
Last month, the annual inflation rate increased for the third consecutive month to 61.5% in September 2023 from 58.9% in August. The highest inflation jump since December 2022 has been primarily attributed to increases in tax rates and the devaluation of the lira.
READ MORE: Turkish inflation spinning out of control
Previously, the country’s government supported a policy of low interest rates despite high inflation. This caused a currency crisis in late 2021 and pushed inflation above 85% last year. Annual consumer price inflation is expected to rise to around 60% by year end.
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