The strong rise of the Turkish lira after Erdogan's speech... What happened?
The dollar against the lira
- ANKARA (Reuters) - The Turkish lira rebounded sharply late on Monday after President Recep Tayyip Erdogan unveiled a series of steps he said would ease the burden of currency deterioration on Turks, while vowing to press ahead with a policy of low interest rates that he has put in place.
- The lira, which had fallen earlier on Monday by more than 11 percent to about 18.4 against the dollar, strengthened about 10 percent after Erdogan's announcement.
- The Turkish currency was last trading at 12 lira against the dollar.
- This recovery comes as the dollar is under pressure from falling US Treasury yields in the wake of a blow to Washington's spending plans, which were introduced by the Democratic Party, and due to fears that the outbreak of the novel coronavirus, Omicron, will continue.
- Speaking after a cabinet meeting, Erdogan said the measures will ensure that citizens do not have to convert the lira into a foreign currency due to the lira's collapse, as well as pledge to guarantee deposits.
- "We are presenting a new financial alternative to citizens who want to alleviate their concerns stemming from the rise in exchange rates when they evaluate their savings" Erdogan said.
This country will no longer be a paradise for those who raise their money at high interest rates
- "With the interest rate cuts, we will all see how inflation will start falling within months... This country will no longer be a heaven for those adding to their money with high interest rates, it will not be an import haven" he added.
- He also called on "everyone with money, access to finance" to contribute to investments and pledged steps to aid exporters and pensioners.
- The Turkish lira rebounded strongly on Monday after President Recep Tayyip Erdogan's statements, reaching 14.27 against the dollar.
- Erdogan said at a press conference after presiding over a government meeting at the Presidential Complex in Ankara that his country will launch a new financial tool that will allow achieving the same level of potential profits for savings in foreign currencies by keeping assets in lira.
- He added, "We will provide a new financial alternative for our citizens who wish to allay their fears caused by the high exchange rates."
- He continued, "From now on, there will be no need for our citizens to transfer their savings from the lira to foreign currencies, for fear of an increase in exchange rates."
- As a result of these statements, the Turkish lira rose against the dollar by 22.3 percent, to reach 14.27 against the dollar.
- Before the statements, the exchange rate of the Turkish lira against the dollar reached 18.3674, and after the speech it fell to 14.2748, at 21:25 local time (+3 GMT).
Erdogan says inflation will start to decline with interest rate cut
Turkish President Recep Tayyip Erdogan has confirmed that the country's inflation will start to decline within a few months, given the interest rate cut.
In his speech after the end of the Cabinet meeting in the Presidential Complex in the capital, Ankara, Erdogan added that the Turkish government is the one who will raise the Turkish Central Bank's foreign exchange reserves, not foreigners.
He said, "We will see in the next few months how inflation will decrease in the country. We did not take over the administration of the country yesterday, but 19 years ago, and we know how the economy is managed."
The Turkish president indicated that Turkey has no intention or need to retreat "in the slightest step" from the free market economy and the foreign exchange system.
He stressed that his government would not allow any steps to be taken that would halt investments, reduce job opportunities, reduce production or disrupt exports in Turkey.
He explained that the withholding tax on dividends paid by companies will be reduced to 10%.
Erdogan reiterated that "this country will no longer be a country that pledges its economy and policy to foreign countries through IMF programs.
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