BEIRUT, LEBANON (11:30 A.M.) – The Turkish lira fell to a record low on Thursday, after the central bank unexpectedly kept the benchmark interest rate unchanged, increasing pressure on the ailing currency as investors assessed geopolitical risks.
During Thursday;s trading, the lira fell by 2.1% against the dollar to 7.98, the lowest level ever for the currency, which lost about a quarter of its value this year and recorded successive low levels. Later stabilized at 7.93 pounds per dollar, according to site, Al-Moniter.
Economists expected policymakers to raise the key repurchase price by one week by 175 basis points, according to a Bloomberg survey.
Instead, the central bank kept the rate at 10.25%, well below inflation which officially stands at 11.75%. This means that investors can expect a negative return on lira-denominated assets after inflation.
President Recep Tayyip Erdogan has pressed the central bank to keep interest rates low to encourage lending and boost the economy, while investors continue to assess geopolitical risks .
Erdogan believes that higher interest rates cause inflation, while most economists support the opposite view, and he fired the former central bank governor for refusing to cut interest rates, according to the site.