Turkish Lira Falls to Record After Central Bank Cuts Rates Again By

(Bloomberg) — The Turkish lira fell to a record low after the central bank cut borrowing costs for a third straight month, a move that risks further undermining price and currency stability.

The fell as much as 3.3% to 10.9765 against the dollar, extending the biggest depreciation in emerging markets this year. Policy makers cut the rate by 100 basis points to 15%, in line with the median estimate in a Bloomberg survey.

Consumer inflation accelerated to almost 20% in October, a level last seen in the wake of a currency crisis three years ago. Yet under pressure from President Recep Tayyip Erdogan, the central bank has lowered interest rates by 400 basis points since September, driving the currency’s real yield well below zero. 

Easier policy in Turkey also leaves the lira vulnerable to further gains in the U.S. dollar. The greenback rose to the highest level in more than a year against a basket of peers this week, piling pressure on riskier emerging-market currencies.

The lira has lost around a third of its value against the dollar since December and is poised for a ninth straight yearly loss. It has weakened more than 20% since the central bank started cutting rates in September.

Turkey’s benchmark erased earlier gains to trade 0.5% higher after the decision. The yield on 10-year government bonds jumped as much a 57 basis points to 20.44%.

The lira pared declines to trade at 10.8391 per dollar as of 2:18 p.m. in Istanbul.

(Updates prices.)

©2021 Bloomberg L.P.