Erdoğan meets with central bank governor as lira crashes

Turkish President Recep Tayyip Erdoğan on Tuesday met with central bank Governor Şahap Kavcıoğlu as the lira suffered a suffered a historic retreat after Erdoğan declared that his country was fighting an “economic war of independence” and vowed to keep interest rates at below inflation.

The meeting took place as the lira dropped by more than 15 percent earlier in the day, trading 8.8 percent lower at 12.5023 per dollar as of 4:55 p.m. local time in Istanbul, Bloomberg reported, citing an official with direct knowledge on the matter, who spoke on condition of anonymity.

Down more than 40 per cent against the dollar this year, the lira plunged as much as 15 per cent on Tuesday, surpassing Turkey’s currency crisis of 2018 and the 13 to the dollar threshold before easing to around 9 per cent in mid-afternoon dealings in London. 

Erdoğan, who maintains the unorthodox view that higher interest rates are inflationary, on Monday said he was “pleased” the central bank had cut rates for the third month in a row last week, despite warnings that it may lead to increased inflation from economists. Inflation in the country has accelerated to almost 20 percent. 

The Turkish president defended the defended the current policies in an address to the nation following a cabinet meeting on Monday.

"We see the game played by those over the currency, interest and price hikes ... and show our will to proceed with our own game plan," Erdoğan said. "We will emerge victorious from this war of economic independence with the help of Allah and our people."

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