On Monday, the Turkish lira was cheaper than ever before due to months of weakening.
Turkey the lira has strengthened 44 percent this week due to billions of euros in government subsidy purchases. The government has also promised to cover losses due to currency depreciation and certain deposits, according to Reuters.
On Monday, the Turkish lira was cheaper than ever before due to a month-long weakening: the dollar was worth 18.4 lire. On Friday, the value of one dollar was 11.7 lire, according to Reuters.
The currency has been weakened by the central bank’s exceptional monetary easing and increasing inflationary pressures.
Monday’s president Recep Tayyip Erdoğan announced that the Ministry of Finance and the central bank will compensate for losses due to the sharp depreciation of the currency.
“We have seen the exchange rate bubble burst in one day because of our actions,” President Erdogan said on Friday, according to Reuters.
Read more: Turkish currency’s downward spiral and inflation are widely felt in the daily lives of residents – Kurimus could be a political turning point for President Erdoğan
Notice as a result, banks sold large amounts of dollar-denominated securities and bought lira-denominated securities, according to Reuters sources. The growth in demand for the currency will lead to its strengthening.
Due to pressure from the president, the central bank has eased monetary policy several times since September and the key interest rate has been cut to 14 per cent, despite rising consumer prices, or inflation, to 21 per cent, Reuters reports.
Usually central banks will tighten monetary policy if inflation is exceptionally rapid for a long time. In Turkey, inflation has been above 10% for two years.
Next year, inflation is expected to rise to 30% due to the long-running depreciation of the lira. As a result of inflation, the purchasing power of money weakens because a certain amount of money allows you to buy fewer goods and services than before.
Correction 24.12 at 15.52: Correct value of the lira corrected for the article and definition of inflation.
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