Erdogan instructed the country’s central bank — which analysts say has no independence from him — to repeatedly slash borrowing rates in 2020 and 2021, even as inflation continued to rise. Central bank chiefs who expressed opposition to this course of action were fired; by the spring of 2021, Turkey’s central bank had seen four different governors in two years.
The country’s interest rate was gradually reduced to 14% last fall and has remained unchanged since. The lira plunged 44% against the dollar last year and is down 21% against the greenback since the start of this year.
Turkey’s government has introduced unorthodox policies to try to shore up the lira without raising interest rates. In late June, Turkey’s banking regulator announced a ban on lira loans to companies holding what it deemed to be too much foreign currency, which boosted the currency briefly but caused more uncertainty among investors who questioned the sustainability of the measure.
