Central Bank of the Republic of Turkey (CBRT) on Tuesday said it is observing unhealthy price formations in forex markets that are “unrealistic and completely detached from economic fundamentals."
The lender said in a statement that it implements a floating exchange rate regime that is independent of all exchange rate levels and may only intervene in excessive volatility without any permanent direction.
Last Thursday, the CBRT cut its policy rate by 100 basis points to 15% and signaled more easing would come before the end of the year. The CBRT has now slashed rates by 400 basis points since September.
The cut drove up the value of the dollar against the Turkish lira. The lira traded at 12.74 to the greenback at 6 p.m. GMT.
Erdoğan blamed the lira's weakness on games he said were being played on foreign exchange and interest rates.
“We see the games being played on the exchange rate and interest rates. We came out of every struggle we entered honorably by taking a strong stance. With the help of Allah and the support of our nation, we will emerge from this economic war of independence with victory,” he said.
Erdoğan has been backing the view that lower interest rates are the only way to curb inflation. He has called for stimulus to boost exports, investment and jobs.
The president also reaffirmed the government’s determination to tackle “opportunists” that are making exorbitant price hikes by trying to take advantage of the “rise in the exchange rates, which has no logical explanation, as an excuse.”
Amid stubbornly high prices, the government has blamed supermarkets and opened probes into potential exploitative pricing.
The annual inflation rate rose to 19.89% year-on-year in October, according to official data, driven by food, services, housing and transportation prices, reflecting in part soaring world energy prices.
The central bank says inflation pressure is temporary though likely to last through mid-2022.