A quick comment, comment on the Turkish lira by Stefan Rykeus Frankfurt (ots) – There is one thing you cannot accuse Recep Tayyip Erdogan and his clique of economic and political gamblers in the centers of Turkish state control: that they lack ingenuity. The Banking Supervisory Authority orchestrated the last trick. From now on, Turkish banks will have to limit their lending to companies if they hold a certain amount of foreign currency. This gave a huge boost to the sharply declining lira. But the probability is high that it will again be a flash in the pan.
The reason is that the root cause of Turkey’s chronic currency weakness does not change. It is the inaction of the central bank that he ordered from above. The currency watchers, who are loyal to Erdogan, have been firmly committed to the key rate of 14% for more than six months, although in the meantime inflation has moved to values above 70%. Low interest rates, unwavering inflation tolerance, and the calculated devaluation of the lira aimed at making it easier for Turkish exporters to do business in global markets have become the unmistakable hallmarks of Erdogan’s economic policy.