Turkey: Devaluation of the pound accelerates – It has lost 55% of its value since the beginning of ’21

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The crisis of the Turkish currency has accelerated today as well plunged 8% to a new historically low level, due to concerns about an inflationary spiral from the unorthodox President Recep Tayyip Erdogan’s plan to cut interest rates amid a spike in prices.

THE The exchange rate of the Turkish currency fell to 17.0705 pounds per dollar, causing the central bank to intervene directly in the foreign exchange market to support the currency, for for the fifth time this month.

The intervention of the central bank reduced the losses of the pound, with its exchange rate forming at the level of 16.5 at 13.16 (Greek time). At this level, the losses this year amount to 55%, with 37% in the last 30 days – causing great upset to the Turkish economy.

Erdogan’s decision to cut interest rates by five percentage points from September – the last one happened yesterday – threw inflation above 21%. It is likely to reach 30% next year due to rising import prices and the extraordinary increase in the minimum wage, according to economists.

“With Erdogan seeming to insist more on his stance against high interest rates, the longer the currency crisis lasts, Turkey could cross the point of no return,” a Tellimer official said. the pound is completely disconnected from key economic data.

“We are still unable to catch the falling knife. “As long as Erdogan is at the helm, there is nothing that will stop the pound from depreciating,” he added, referring to the possibility of new investments in Turkish assets.

The side effects are quick and painful as Turks see their savings and incomes evaporate.

Erdogan announced a 50% increase in the minimum wage to 4. 4,250 ($ 275) a month from next year, but that is expected to boost inflation by 3.5 to 10 percentage points.

The increase concerns about 6 million workers, but, given the large devaluation of the pound, The new minimum wage is still lower than the $ 380 equivalent last year.

“We believe that the current policy mix is ​​essentially unsustainable,” said S&P’s director of credit ratings in Europe, the Middle East and Africa.

Source: ΑΠΕ-ΜΠΕ

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