Turkish lira plunged near record low 3.9/USD this morning and bond yields spiked over 12.5% for the first time in history as investor anxiety escalated following President Erdogan's attack on the nation's central bank, decrying it's "wrong path."
And bond market panic...
As Bloomberg reports, Turkish President Recep Tayyip Erdogan signaled an end to his uneasy truce with the new central bank chief, attacking the institution now run by Governor Murat Cetinkaya for its repeated revisions to economic targets and “wrong path” to tackle soaring inflation.
“They say central banks are independent so we shouldn’t interfere. This is the end result because we haven’t interfered,” Erdogan said in a speech on Friday in Ankara.
“Results speak for themselves.”
“We will solve this, things can’t go on like this,” Erdogan said, vowing to step up a fight against what he calls the “interest rate lobby,” an alleged cabal of financiers and lobbyists that he says is conspiring to keep Turkey’s interest rates artificially high.
“We can’t make this a taboo,” he said, rejecting the idea that central bank independence means he shouldn’t comment on interest rate policy.
The comments come as a slew of economic stimulus measures implemented in the wake of a 2016 coup attempt have helped push growth up while driving core inflation to 11.8 percent in October, the highest since 2004.
“We’re back at Erdoganomics 101,” said Cristian Maggio, head of research at TD Securities in London.
“I would have expected him to start shouting at the central bank only once the lira was on a more solid footing versus the U.S. dollar and euro. We’re clearly not there yet, so that makes me think that he’s more concerned about growth, a concern that we share.”