Nov 23, 2021 08:51AM ET
By: AnalysisWatch
The Turkish lira plunged 15% on Tuesday, the second worst day in the country's history, after President Tayyip Erdogan defended recent drastic interest rate cuts and vowed to win his "economic independence war" --despite widespread criticism and pleas for a rate correction.
The lira fell as low as 13.45 to the dollar, hitting a record low for the 11th consecutive day. It has lost 45% of its value this year, including a drop of almost 26% since the beginning of last week.
Erdogan has put pressure on the central bank to move to an aggressive easing cycle that he says is aimed at boosting exports, investment and employment-even as inflation soars to nearly 20% and the currency's depreciation accelerates, severely affecting Turks' incomes.
Many economists called the rate cuts reckless and urged a reversal, while opposition politicians called for early elections. Turkish citizens told Reuters news agency that the devaluation of the national currency was upsetting their household budgets and plans for the future.
Former central bank deputy governor Semih Tumen, who was sacked last month in the latest rapid shake-up of Erdogan's leadership, called for an immediate return to policies that protect the value of the lira.
Tuesday's plunge was the sharpest since the currency crisis peaked in 2018, leading to a sharp recession and years of below-average economic growth and double-digit inflation.
Although the lira managed to recoup some losses until 1339 GMT, when it was worth 12.7 to the dollar, the last 11 days of losses were the worst run since 1999.
The central bank has cut interest rates by a total of 400 points since September, leaving real yields deep in negative territory while virtually all other central banks have started tightening monetary policy or are preparing to do so.