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Turkish lira touches weakest in a week after Erdogan says rates will decline

Published: Updated:

The Turkish lira on Thursday touched its weakest level against the US dollar in a week on concerns over monetary policy after President Tayyip Erdogan said interest rates would decline.

The lira stood at 8.54 to the dollar at 0618 GMT, weakening from a close of 8.48 on Wednesday. The currency has lost some 12 percent so far this year.

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In a broadcast interview, President Erdogan said inflation, which hit a two-year high in July, would slow after August and interest rates would come down, reiterating his longstanding opposition to high interest rates.

A foreign currency trader at a bank said that, although inflation was expected to fall in the coming months, the market saw little room for the central bank to cut interest rates soon, and that politicians’ talk of a cut had weakened the lira.

Official data showed inflation hit 18.95 percent last month on the back of higher food and energy prices, almost matching the central bank’s benchmark rate of 19 percent, increasing pressure on the bank to keep policy tight.

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