The lira recorded its lowest level ever at 8.2655 against the greenback by 09:08 GMT. The currency had closed at 8.1875 pounds, Tuesday, and had lost about 28% since the beginning of this year.
The continued decline of the lira comes in light of low interest rates and a decline in foreign investors ’interest in Turkish assets, amid anticipation of the possibility of sanctions being imposed on it by the United States, the continuing conflicts in the Eastern Mediterranean and the Caucasus, and the economic repercussions of the Corona pandemic.
The central bank raised its inflation forecast to 12.1 percent from 8.9 percent, Wednesday, and said that “our expectation that inflation will record a downward trend in the second half of the year has not materialized.”
The Governor of the Turkish Central Bank, Murat Uysal, said that by the end of the year, the rate of consumer price growth will be 1.12%, compared to previous expectations of 9.8%.
Uisal explained that the central bank will maintain its tight monetary policy until inflation improves, warning that the weakness of the pound poses risks to price stability.
The latest central bank forecast points to darker expectations for inflation this year than the government’s expectations, and Treasury and Finance Minister Berat Albayrak raised the government’s forecast last September to 5.10% at the end of 2020 and 8% the following year.
Al-Bairaq’s expectations came a week after the central bank suddenly raised the interest rate by 200 points in order to stop the continuous slide of the currency.
VTP Capital analyst Akin Tuzun, who expects an explicit interest rate hike in November, said pressures on inflation and the lira are likely to push Turkey’s central bank to be more conventional.
The lira fell by 8.0% against the dollar, Wednesday, after falling below the $ 8 level this week, amid a wave of negatives for risky assets continuing to decline in its value for nine weeks, the longest defeat since 1999.
The currency’s decline, which exceeded 27% this year, distorted the central bank’s previous expectations for inflation, and Awsal predicted earlier this year that annual price growth would drop to single digits from the second half, ending the third quarter at 8.11%.
Turkey is spending its foreign exchange reserves faster than any other major developing economies in an effort to support the currency. Foreign investors also sold the equivalent of $ 3.13 billion in Turkish stocks and bonds this year, the highest level since at least 2005.
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