Turkish lira drops after Erdoğan rails against high interest rates on eve of central bank meeting

President Recep Tayyip Erdoğan on Nov. 18 railed against high interest rates, one day before the central bank holds its first policy meeting under new governor Naci Ağbal. Following Erdoğan's comments, the Turkish lira fell 1 percent to 7.77 per U.S. dollar.

Duvar English

The lira fell as much as 1 percent to 7.77 per U.S. dollar on Nov. 18 after President Recep Tayyip Erdoğan said that investors should not be “crushed by high interest rates.”

Erdoğan's statement came ahead of a central meeting on Nov. 19 on hopes of a sharp interest rate hike that could temper rising inflation.

"It is obvious what high interest rate leads to. Can we undertake production with high interest rate? It is not possible. We should not allow our investors to be crushed by high interest rate,” Erdoğan said, while addressing an economic council meeting of the Turkish Union of Chambers and Commodity Exchanges in the capital Ankara.

"We give great importance to discussing with our business circle on all matters related to the economy," he said.

The central bank is expected to hike its policy rate to 15 percent on Nov. 19 from 10.25 percent, according to a poll conducted by Reuters and Anadolu Agency.

The introduction of partial lockdowns on weekends and new virus curbs in the tourism-dependent economy dampened risk appetite, but focus remained on the crucial rate decision at the first central bank meeting under new governor Naci Ağbal.

Erdoğan on Nov. 7 replaced former governor Murat Uysal with Ağbal, a former finance minister. A day later Berat Albayrak, Erdogan’s son-in-law, stepped down as finance minister with little explanation. Erdoğan since vowed a new economic growth strategy, saying that reform regulations will continue.