Inflation - Turkish Lira on the decline again

According to President Recep Tayyip Erdogan, the Turkish lira has fallen again to a record low. On the night of Wednesday, up to 8,80 lira were paid for one dollar and 10,75 lira for one euro, which is more than ever before.

The Turkish currency has been under pressure for months. The record low was reached after President Erdogan demanded a rate cut by the country's central bank. 

Late on Tuesday evening, Erdogan announced in an interview with the state television broadcaster TRT that he had spoken to the central bank governor and that an interest rate cut was "a necessity". Erdogan named the summer months of July and August as a possible point in time.

Erdogan: Fight high inflation with low interest rates

Previously, Erdogan had repeatedly taken the view that one should fight the high inflation in the country with falling interest rates. This contradicts economic principles. In addition, the President had changed the leadership of the central bank and thus shattered the confidence of the financial markets in the country's monetary policy and dashed the hope of a consistent fight against inflation.

Turkey is now in a dangerous spiral of comparatively high inflation and a currency that is depreciating more and more. In April the inflation rate had risen to around 17 percent.

"We are once again a bit surprised at how openly and clearly Erdogan is putting the pistol on the chest of his central bank chief," commented foreign exchange expert Esther Reichelt from Commerzbank on the latest events. "This confirms our belief that Erdogan actually believes that he can solve Turkey's economic problems with lower interest rates - even if he is running into a new lira crisis with his eyesight." According to the expert Reichelt, a course is now moving forward 10 lira for a dollar within reach. (apa / dpa-AFX)