The Turkish lira has been in free fall for most of this year with its value dropping by 38% driving inflation up by 20%. The value of the lira has collapsed to a record level of over 13 per U.S. dollar before rebounding slightly to just over 12 per dollar. The currency has been in steady decline since the adoption of a monetary policy championed by President Recep Tayyip Erdogan of lowering interest rates.
Erdogan has taken a position against that of most world economists and analysts of raising interest rates to mitigate inflationary pressure. The current interest rate set by the Turkish central bank stands at 15%, which is high by western standards but which was lowered from 20% this year.
In a recent speech, Erdogan defended the lowering of interest rates as part of a plan to win an “economic war of independence."
But for most of Turkey's population, prices for basic goods and commodities have skyrocketed while salaries in the local currency have significantly devalued.
Erdogan has fired three central bank chiefs in the past two years over policy differences with former officials voicing their opposition to the president's policies.
“We need to abandon this irrational experiment, which has no chance of success, and return to quality policies that will protect the value of the Turkish lira and protect the welfare of the Turkish people,” Semih Tumen, a former central bank deputy governor recently tweeted.