Turkey’s central bank sold off foreign currency Monday – its fourth such intervention in recent weeks – in response to a sharp decline in the Turkish lira’s value, which dropped to a record low of 14.75 against the US dollar. Even after the intervention, the lira traded at 14.13 to the dollar, 1.8% weaker than Friday’s closing price. The historic dip came after the S&P agency downgraded its rating for Turkey from “stable” to “negative,” and in anticipation that interest rates will be cut yet again when the monetary policy board meets on Thursday. The central bank has already slashed interest rates by 4 percentage points since September, in keeping with the pro-growth policies of President Recep Tayyip Erdoğan. The result has been massive borrowing even while inflation, already sky-high, climbed to an annual rate of 21.31% in November. It remains to be seen whether Turkish voters will reward the president for propping up the business community or punish him for fueling price hikes that make even basic goods unaffordable to millions of citizens.
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