ANKARA, Turkey (AP) — Turkey’s currency crashed to an new all-time low against the dollar Friday, a day after the Central Bank again lowered a key interest rate despite surging consumer prices, a move in line with President Recep Tayyip Erdogan’s unconventional economic policy.
The lira’s fall prompted the Central Bank to intervene by selling off more foreign currency. It was the bank’s fifth intervention in recent weeks to attempt to prop up the lira.
The lira hit a new record low of 17.14 against the dollar before the bank intervened and the currency recovered some of its losses Friday. Still, it was around 5% weaker against the U.S. currency from Thursday’s close.
Turkey’s beleaguered currency has lost 55% of its value against the dollar since the start of the year.
The Central Bank announced Thursday announced that it was cutting the key interest rate from 15% to 14% even though inflation is running at a staggering 21%. The bank has now slashed rates by 5 percentage points since September even as most other national banks have raised interest rates to ease high inflation.
Erdogan, who has long argued that high interest rates cause inflation, has pushed for low borrowing costs to stimulate the Turkish economy, boost growth, exports and employment.
Meanwhile, the Turkish stock exchange Borsa Istanbul’s benchmark index saw a sharp decline Friday, triggering automatic circuit-breakers that temporarily halted transactions, Turkey’s Cumhuriyet newspaper and other media reported. The index was some 8% down from Thursday’s close.
The weakened lira is driving prices higher, making imports, fuel and everyday goods more expensive. Many people in the country of more than 83 million are struggling to buy food and to provide for other basic needs.