People doing shopping at the local market in Istanbul, Turkey on December 5th, 2021. The depreciation of the Turkish lira weakened the purchasing power of citizens.
Erhan Demirtas | NurPhoto via Getty Images
Turkey’s battered currency fell to a new low Monday past 14 to the dollar, ahead of what investors expect to be rate cuts from the central bank despite soaring inflation.
The lira was trading at 14.33 to the dollar at 1:25 p.m. in Istanbul, according to Reuters data, a slight recovery from the record low of 14.99 earlier in the day. This is the first time the currency has surpassed 14 to the greenback.
Turkey’s central bank subsequently announced it would intervene directly in the foreign exchange market on Monday, selling dollars to prop up the lira.
Turkish Finance Minister Nureddin Nebati said Monday the country is determined not to raise interest rates — in an echo of President Recep Tayyip Erdogan’s hardline stance against raising rates — which economists agree would actually aid the currency and rein in inflation, which is now near 20% in the country of 84 million.
“We won’t raise the interest rate; you will see that we can do this without raising rates,” Nebati said, adding that he did not know if the central bank’s monetary easing would stop.