The lira fell the most in emerging markets after Turkey’s Economy Minister became the latest official to call for interest rate cuts, stoking concern that politicians are interfering in monetary policy. Speculation that global growth is faltering also contributed to the drop.
The currency lost 0.6 percent to 2.8488 per dollar, the weakest level in more than a week, in Istanbul, erasing gains of as much as 0.3 percent. The central bank should take advantage of the global economic downturn and lower borrowing costs “ radically,” Economy Minister Mustafa Elitas said in comments published in state-run news agency Anadolu Agency. The MSCI Emerging Markets Currency Index fell for a second day.
Elitas is the latest in a long line of politicians, including President Recep Tayyip Erdogan, to call for lower borrowing costs.
The central bank reduced the overnight lending rate for the first time in 13 months in March, and while investors see further cuts, some have questioned policy markers’ independence. Governor Erdem Basci’s term expires this month and speculation about future policies is rife.
“With the central bank governor appointment looming, these kinds of comments from the government might suggest a less market friendly appointment,” said Emir Baruh, a currency trader at Akbank TAS in Istanbul.