Central banks around the globe are currently staring at inflation rates unseen in more than 20 years. Supply chain problems and labour shor...
Central banks around the globe are currently staring at inflation rates unseen in more than 20 years. Supply chain problems and labour shortages arising from the pandemic, combined with sharply rising food and energy prices, have pushed prices up by as much as 6.2% in the United States, 4.2% in the United Kingdom, 10.7% in Brazil and 4.5% in India. Every central bank has responded by either raising interest rates or committing to raising them in the immediate future.
It is too early to say whether the new coronavirus variant B.1.1.529, first identified in Botswana, will take rate-rises off the agenda, but certainly, they have not been part of Turkey’s plans. Since September, Turkey has cut interest rates by four percentage points from 19% to 15%, wreaking havoc in the financial markets in the process.
The Turkish lira, which was trading at $8.28 in early September, fell to $13.40 a few days ago, its lowest level on record at the end of an eleven-day losing streak. It recovered a little but then weakened again as investors move money out of weaker currencies in response to new fears about Covid-19.
So why has Turkey had such an “irrational” policy stance on interest rates while everyone else is doing the opposite?
Erdoğanonomics
It would have been of...
