Turkish Lira in free fall against the Euros and Dollar

Staggering inflation and decaying consumer sentiment have combined to force the Turkish lira lower against the dollar and the euro.

As at Friday morning, the lira was at €9.05 to the euro, and at $7.434 to the dollar.

According to World Bank statistics, prices have risen to a point that many cannot pay for food, and one-fifth of the country’s population now lives below the poverty line, with 1.6 million more likely to fall to that level. The cost of food has risen by 18.1 per cent since the beginning of the year, according to the Turkish Statistical Institute.

“Inflation is at 16 per cent and is expected to increase further. Current monetary policy is far from tight. It is insufficient to quickly bring down inflation to the central bank’s 5 per cent target,” writes economist Güldem Atabay.

A group of economists and experts known as the Independent Inflation Research Group (ENAG), formed by academics and researchers last year, calculated that Turkey’s real inflation rate was at about 32 per cent, with month-on-month inflation rising 3.15 percent in January and about the same amount in February.

The lira had gained about 20 per cent, reaching 8 to the euro, after Turkish President Recep Tayyip Erdogan appointed a new finance minister, and a new central bank governor back in November. 

The governor raised interest rates to 17 per cent, and that effort started up the return of foreign investment to the country while president Erdogan also promised economic reforms.