The Turkish Lira plummeted to a new record low against the US dollar on Monday, hitting levels unseen before. This sharp decline reflects growing investor anxiety surrounding President Recep Tayyip Erdogan’s influence on monetary policy and the overall economic outlook for Turkey.

The currency’s weakness is fueled by concerns that Erdogan, who is seeking re-election, will continue to pressure the central bank to keep interest rates low, despite rising inflation. Investors fear this interference will undermine the central bank’s independence and its ability to effectively manage the economy.

Several factors are contributing to the Lira’s downward spiral:

• Political Uncertainty: The upcoming elections add to the volatility, as investors await clarity on the future direction of economic policy.
• Inflation: Turkey’s inflation rate remains stubbornly high, eroding the purchasing power of the Lira.
• Current Account Deficit: A widening current account deficit puts further pressure on the currency.
• Central Bank Independence: Doubts about the central bank’s autonomy are a major concern for international investors.

The weakening Lira could have significant consequences for the Turkish economy, including:

• Increased import costs, potentially leading to higher inflation.
• Difficulties for Turkish companies with foreign currency debt.
• Reduced investor confidence, hindering economic growth.

Analysts are closely monitoring the situation and urging the Turkish government to take steps to restore confidence in the economy and the central bank’s independence. Failure to do so could lead to further instability and a deeper economic crisis.