ISTANBUL (Reuters) – Turkey’s lira
tumbled 3% to 13.2 versus the dollar on Tuesday, resuming a slide towards last week’s record low, as strong economic growth data failed to calm concerns about aggressive rate cuts at a time that inflation is near 20%.
The lira’s selloff this month is its fifth worst ever, according to Goldman Sachs research, putting it among the ranks of crises in 2018, 2001 and 1994. It has lost some 43% of its value so far this year and 27% this month alone.
The currency hit a record low 13.45 last Tuesday after President Tayyip Erdogan’s repeated defense of the monetary easing that economists have widely panned as reckless.
In response to the cuts to 15% in the policy rate, the opposition has called for a policy reversal and snap elections. Concerns about central bank credibility took another blow on Tuesday after a top official was said to have left his post.
“Monetary policy is likely to remain under political influence and not tight enough to significantly reduce inflation, stabilize the currency and restore investor confidence,” credit ratings firm Moody’s said in a note.
Erdogan and other government officials have stressed that while there may be price pain for a while, the monetary stimulus should boost exports, credit, jobs and economic growth.
Erdogan’s most recent defense of rate cuts was Monday when he was quoted as saying he will never defend hikes nor compromise on the issue. Economists say the depreciation and accelerated inflation will derail Erdogan’s plan.
Under pressure from Erdogan, the central bank has slashed rates by 400 basis points since September and is widely expected to ease again in December. Real rates are deeply negative at nearly 500 basis points.
A central bank source said on Tuesday that the executive director of the bank’s markets department, Doruk Kucuksarac, had left his post and had been replaced by his deputy Hakan Er.
Kucuksarac did not immediately respond to a request for comment.
A banker who requested anonymity said his departure was further evidence of an “erosion and devastation” of the institution after this year’s mass leadership overhaul and years of political influence on policy.
Erdogan sacked three monetary policy committee members in October. Governor Sahap Kavcioglu was only appointed to the post in March after the president fired his three predecessors in the last 2-1/2 years over policy disagreements.