* President Erdogan said there was “no option” other than cutting interest rates to spur growth
* Lira is down nearly 17 per cent against dollar since the start of year
* Central bank hiked interest rates for the first time in almost three years last week
President Tayyip Erdogan on Friday called on Turks to convert their foreign exchange into gold or the Turkish lira and said there was “no option” other than cutting interest rates to spur growth – comments that helped send the lira to a new low.
The Turkish currency saw its worst month since the 2008 financial crisis in November, hit by a resurgent U.S. dollar and investor concern about political stability in the wake of July’s failed military coup.
The central bank hiked interest rates for the first time in almost three years last week in a bid to stem the currency’s decline, despite Erdogan’s repeated calls for lower borrowing costs. But the lira has continued to weaken.
“Those who keep foreign currency under their pillow should come and turn that into Turkish lira or gold,” Erdogan said in a speech to mark the opening in Ankara of what was billed as Europe’s largest automobile showroom complex.
“I say there is no option other than cutting interest rates, and I say no more. We will open the way for investors with low interest rates,” he said. The lira fell to a record low of 3.5250 against the dollar after he spoke.
The government has said it will take measures to make it easier for state institutions to do transactions in lira rather than dollars, and has urged private businesses to do the same in an effort to shore up the currency.
The lira is down some 17 per cent against the dollar since the start of the year. Its weakness will make it difficult for the central bank to deliver the rate cuts Erdogan wants, even as economic growth slows.