Turkey’s President Recep Tayyip Erdogan listens as Britain’s Prime Minister Theresa May (unseen) talks during their meeting inside 10 Downing Street in central London on May 15, 2018. Angry protests greeted Turkish President Recep Tayyip Erdogan on Tuesday as he met Queen Elizabeth II and held talks with Prime Minister Theresa May. Minor scuffles broke out as pro-Erdogan counter-protesters walked in front of Kurdish demonstrators outside Downing Street, with police wrestling some of the ringleaders to the ground. / AFP PHOTO / POOL / Matt Dunham
Turkey’s embattled currency the lira on Wednesday hit new historic lows against the dollar as investors took fright at comments by President Recep Tayyip Erdogan suggesting he wanted a bigger say in monetary policy.
The lira has lost nine percent in value over the last month alone as Turkey heads to snap presidential and parliamentary elections on June 24 amid growing concerns over the health of the economy.
In an interview with Bloomberg TV on Monday while on a visit to London, Erdogan signalled he wanted to take greater control over monetary and economic policy if he wins the elections.
“This may make some uncomfortable. But we have to do it,” he said.
Investors have long been rattled by Erdogan’s sustained pressure on the central bank — which is nominally independent — to hike rates to boost growth.
The lira was on Tuesday trading at 4.49 lira to the dollar, a loss of 1.1 percent in value on the day.
The currency had already been under severe pressure last week after Erdogan declared that interest rates were the “mother and father of all evil”.
Erdogan’s statements fly in the face of economic orthodoxy where interest rates are used by central banks around the world as a tool to keep down inflation.
Economists have cautioned that a tighter monetary policy is needed for an economy where inflation is running at 10.85 percent and the currency has lost 25 percent in value over the last year.
The economy has generally been a trump card for Erdogan in his 15 years in power, with the Turkish strongman crediting himself with ending chaos that brought the country to near financial meltdown in the 2000-2001 crisis.
Turkey recorded stellar growth of 7.4 percent in 2017.
But the elections coincide with growing concerns over Turkey’s economic health, notably due to a wide current account deficit and fears the economy is overheating.