The Turkish lira was stable on Thursday after a historic drop to record lows this week that was sparked by President Tayyip Erdogan’s defense of interest rate cuts, despite widespread criticism of his political stance.
Central bankers, regulators and lenders were due to meet later today to discuss the market turmoil. Separately, officials told Reuters that Erdogan ignored calls, even from his government, to reverse the policy. urn: newsml: reuters.com: *: nL8N2SF2I0
The pound was worth 12.09 against the dollar at 10:44 GMT, after strengthening as much as 2% to 11.85 at the start of trading. It hit an all-time low on Tuesday at 13.45.
Prior to the rebound, the currency hit record lows against the US dollar for 11 consecutive sessions. It has lost up to 45% of its value this year, with about half of those losses occurring since the start of last week.
Fixed income markets appeared to be more cautious, with the cost of insuring exposure to the country’s sovereign debt through credit default swaps rising 1 basis point from 478 basis points of Wednesday, while longer-term dollar-denominated sovereign bonds edged down.
Officials from the Turkish central, its banking watchdog BDDK and the banking association were due to meet on Thursday to discuss recent developments in the economy, a banking source told Reuters after the pound fell.
The central bank was due to publish at 11:00 GMT the minutes of last week’s monetary policy committee meeting, in which it cut its key rate by 100 basis points, bringing the cuts since September to 400 points.
Many Turks, already grappling with inflation of around 20%, fear that price increases will accelerate. Opposition politicians accused Erdogan of dragging the country into disaster.
Erdogan defended central bank policy and vowed to win its “war of economic independence”, after pressuring the central bank to go through an aggressive easing cycle in a bid to stimulate exports, investment and employment.
But many economists called the rate cuts reckless, and opposition politicians called for an immediate election. The Turks told Reuters that the currency’s dizzying collapse was shattering their household budgets and their plans for the future.