The Turkish lira continued to slide and reached a record low against the US dollar Friday, a day after the Central Bank sharply cut interest rates. It was another hit after a global financial watchdog placed Turkey on a list of countries to monitor for money laundering and terrorism financing.
The lira dropped to an all-time low of 9.66 against the dollar early Friday before settling at around 9.61 against the US currency. The lira has lost more than 20% of its value since the start of the year.
The Central Bank’s monetary committee cut the rate Thursday from 18% to 16%, despite rising inflation, surprising analysts and compounding a long run of losses. The cut was seen by many as further evidence of the bank’s lack of independence from President Recep Tayyip Erdogan’s government.
Erdogan has long been pressing for lower borrowing rates to boost growth. Economists generally view higher interest rates as a curb on inflation, but the Turkish president has repeatedly argued that high interest rates cause prices to increase.
Later Thursday, the Paris-based Financial Action Task Force, or FATF, placed Turkey on its “gray list” over its failure to make sufficient efforts to fight money laundering and terrorist financing.
The Turkish Ministry of Treasury and Finance criticized the move as an “undeserved result.” Nevertheless, it vowed Friday to take the necessary steps in cooperation with the FATF to ensure that Turkey is removed from the list as soon as possible. [AP]