By Dhirendra Tripathi
Investing.com – The Turkish Lira USD/TRY plunged to a new low of 15.61 against the dollar after the country's central bank cut its key interest rate, the one-week repo rate, to 14% from 15%.
It was another volatile day for the currency that has halved in value against the greenback in less than a year under the pressure of President Recep Tayyip Erdogan's economic policy, which has been characterized by increasingly heavy influence on the central bank.
Erdogan has gone about replacing officials at the watchdog several times over last two years in his quest for lower rates, adamant that high interest rates were causing inflation rather than limiting it.
Naci Agbal, a key force in pulling the lira back from previous lows, was removed as governor in March. He was replaced by incumbent Sahap Kavcioglu.
The bank has cut its key rate by 500 basis points since September under Erdogan's plan to boost exports, a policy many economists have widely criticized as reckless.
The bank has continued cutting even as inflation has soared above 21%, way above the central bank’s target of 5%.
According to Reuters, economists predict Turkey’s inflation to near 30% next year, due largely to soaring import prices.