The growing supply of the currency is mostly due to Mr. Erdogan's unconventional monetary policy principles. Low interest rates, which the Turkish President believes are critical for encouraging economic growth and lowering inflation, have long been a favorite of his. The central bank regulates the money supply, which has an impact on interest rates. It increases the price of bonds and other types of debt to lower interest rates by flooding the loan market with new money (thus pushing down their yield). As a result, the entire money supply and, as a result, prices, increase.
Mr. Erdogan believes in the power of low interest rates so strongly that, since 2019, he has fired three central bank chiefs for attempting to raise interest rates in order to bolster the lira's value. Despite strong inflation, the current central bank governor has slashed interest rates and has gone on record to defend his choice. According to official data, Turkey's inflation rate is around 20%, while unofficial estimates put it around 40%. This has raised severe worries about the Turkish central bank's independence, and people have lost faith in the currency as a result.
As he prepares to contest elections next year, Turkey's president is anticipated to continue pushing for lower interest rates. Low interest rates are widely believed to enhance the economy and make voters happy, however some economists are concerned about the long-term sustainability of such debt-fueled prosperity. Lower interest rates are anticipated to increase the quantity of liras on the market, causing the currency's value to fall even lower. Many people hope that as the currency continues to depreciate, Mr. Erdogan would reconsider his decision to decrease interest rates, but this appears doubtful.
I AM CHRISTOPHER DANIEL NDUKAKU, A NIGERIAN IN A FOREIGN LAND CURRENTLY STUDYING MOLECULAR BIOLOGY AND GENETICS AT THE CYPRUS INTERNATIONAL UNIVERSITY, A BLOGGER, A MUSICIAN, AND AN ARTIST MANAGER.