The Turkish Central Bank on interest rate reduction rates. As the Central Bank announced on Wednesday in Ankara, the one-week benchmark interest rate by 0.5 percentage points to 10.75 percent. It is the sixth interest rate cut in a row. Analysts had expected the step a majority. Accordingly, the Turkish Lira did not respond particularly strongly to the interest rate step.

this year, the Central Bank has eased its monetary policy for the second Time. Since the middle of 2019, it has halved its interest rate, on the basis of 24 percent, more than. Background of this course, a decline in Inflation and a recovery in the Lira, which was previously in a serious crisis. The lower interest rates should stimulate the economy.

President Recep Tayyip Erdogan urged the Central Bank in this direction. Experts warn against a too-loose monetary policy, since Inflation is on the rise again. "We expect that Inflation will continue to rise to around 14 percent," says Tatha Ghose, currency expert at Commerzbank.

Falling interest rates and rising Inflation have already led to the fact that the real interest rate in the Turkey has turned Negative. This means for investors is that investments in the country unattractive. Ghose assumes that the real interest rate will fall even further.

The Turkish monetary authorities, however, are under a lot of pressure. Ghose: "The Central Bank of the water is almost up to the neck, because the last Governor had to clear, due to a presidential decree his chair, because he can screw the Interest rate is not fast enough relaxed." US Dollar / Turkish Lira (USD/TRY) 6,0892 TRY +0,0086 (+0,14%) To OTC

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depreciate, Commerzbank sees further development of the Lira in this environment is critical. "The Mix of lower interest rates and rising inflation, is likely to fuel the devaluation of the lire in the next few quarters," says Ghose. "According to our assessment, the Lira is episodes after today's rate cut is still more vulnerable to Risk-off."

This is likely to make to the Ghoses view the room for manoeuvre of the Central Bank for interest rate increases on the test. "We forecast that the Lira will depreciate by the end of 2020."

High debt to be the Problem

Similarly, the experts of the Alliance are to: predict a significant devaluation of the lire in the next twelve months. You go from a minus of ten percent against the Dollar. Of course it would be at 6.25 Lira for a Dollar. "The currency reserves, with 75 billion dollars is not large enough to defend the Lira for a longer period of time," - said in a commentary to the rate decision of the Central Bank. "The reserves cover only 40 percent of the debt in foreign currency in the next twelve months due." The experts fear because of the devaluation, an increasing number of bankruptcies, because many companies are heavily indebted in foreign currency and due to the declining value of the Lira's problems could get to service this debt. With the SCC-exchange of letters next to values, and in the short term and the long term Top return on investment! (Partner quote) Here is an exclusive 30-day free trial!

investors bet on an increasing deterioration of the Lira. As the "Handelsblatt" reported, has set up an anonymous investor $ 500 million on the crash of the Turkish currency, only briefly, after the Lira was the currency exchange rate of six Lira per Dollar below. Hours later, a further Order was over $ 250 million.

It seems that investors are expecting a bad year for Turkish currency. The Lira has recovered recently from a weakness, now a new one begins the downward spiral. Currently be paid for a Dollar to 6.05 Lira. The Lira slips further, this would have far-reaching consequences - especially for the government of President Erdogan.

prices in Turkey to rise ten percent per year

even now, the Turks make the President for the rising Inflation. The failure to keep developments, such as the "Handelsblatt speculated," you could deprive the President of the trust.

The Administration in Turkey is the Situation is different. Minister of Finance, Berat Albayrak speaks of positive economic growth and reduced Inflation. The people experience the opposite. Per year, the prices in Turkey are rising by around ten percent.

The "Handelsblatt" describes the despair of some of the Turks on the basis of dramatic examples: at the beginning of February, a family lit the father in front of the town hall of a provincial town. Just before he tried to kill himself, he cried: "My children suffer from Hunger I can't feed them!" A day later it came in front of the Parliament premises in Ankara to a similar incident. According to media reports, both men have survived. Nevertheless, the acts of desperation, the two fathers are a sign that the situation has still not calmed down.

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iab Date Of Update: 20 February 2020, 13:00