“It is wrong to link [the Turkish Lira’s] fall to the corruption probe,” blasted Turkey’s Prime Minister Erdogan, explaining that the Lira’s fall “is linked to the Federal Reserve’s actions.” Since the taper was announced the Lira has collapsed over 12%, trading at 2.269 to the USD, a record low for the troubled nation’s currency. Of course, the timing is useful for the PM to explain his nation’s demise (as it is also proving a good excuse for Thailand – with massive outflows amid its riots; and Ukraine) but it seems the problems on the streets of Turkey are anything but going away. Today’s drop in the Lira (the 7th in a row) follows a somewhat surprising “disastrous for their credibility” decision by the Turkish Central Bank to leave rates unchanged (and still warn of inflation).
RBS on the Central bank’s decision:
Today’s actions are reflective of a central bank that knows it has to tighten policy but has its hands tied behind its back by politicians
Decision is “disastrous for central bank credibility. Negative for TRY
Erdogan says an “interest rates lobby” is seeking to attack Turkey’s economy and undermine his govt by forcing Turkey to raise interest rates