The Turkish lira weakened further on Monday, becoming the worst-performing currency among emerging markets, following remarks by President Recep Tayyip Erdogan that reignited concerns over his unconventional approach to monetary policy.
The lira slipped 0.6% against the U.S. dollar, deepening its year-to-date decline to roughly 16%. In contrast, the MSCI Emerging Market Currency Index remained stable on Monday and has seen only a slight decrease for 2024.
President Erdogan stated that interest rates would “definitely decrease next year” and referred to 2025 as a pivotal year for economic policies. His remarks came after the Turkish central bank implemented its first rate cut since 2023, despite prior warnings from officials about the risks of sustained monetary easing.
Following Erdogan’s comments, analysts now anticipate that the central bank may lower interest rates at every policy meeting in 2025, fueling concerns about potential economic instability. These developments have heightened investor uncertainty regarding Turkey’s financial trajectory and its commitment to orthodox monetary policies.
