Turkish Lira is hammered by President Tayyip Erdogan’s comments today, just ahead of CBRT rate decision. Erdogan decried high interest rates as a “tool of exploitation”. And defying common logic, he said “if you say inflation is the cause and interest rates are the result, you don’t know this business.” On the other hand, he insisted that “interest is the cause, inflation is the result.”
In addition, he described the depreciation of Lira as an economy as it’s experience “fake volatility” as result of manipulations. Erdogan also pledged to implement measures to solve Lira volatility issues.
According to a Reuters poll, CBRT is expected to hike the benchmark interest rate by between 225 to 725 basis points. Seems like the markets are setting up themselves for disappointments.
USD/TRY hit as high as 6.5514 after the comments and it’s now up around 2%.
