Turkish Lira Hits New All-Time Low of 13.90 as Economic Sentiment Hits 5-Month Low

Turkey’s lira fell to a new all-time low of 13.9 per dollar after ratings agency Fitch downgraded the country’s outlook due to concerns associated with monetary policy direction. The credit rating agency upgraded the debt to BB-, citing deteriorating public confidence as a result of the central bank’s “premature” monetary policies.

The lira entered a rapid slide in November, shedding about 46% of its value versus the dollar this year, as President Tayyip Erdogan reiterated his support for low interest rates amid rising inflation and the currency benefitted from a hawkish US Federal Reserve.

On the economic front, Turkey’s consumer price inflation rate increased more than predicted to 21.31 percent in November, far above than the central bank’s mid-point objective of 5%, while producer prices increased at their fastest pace in 19 years.

Trading Economics offers data on more than 20 million economic variables across 196 nations, including current values, consensus estimates, forecasts, historical time series, and news. Turkey Rating – was last updated on December 4, 2021 on Saturday.

In November 2021, Turkey’s annual inflation rate increased to 21.31 percent, up from 19.89 percent the previous month and above market predictions of 20.7 percent. It was the biggest inflation rate since November 2018 and above the central bank’s objective of 5%, owing to increased oil prices and the lira’s record lows after President Tayyip Erdogan’s pledge to cut interest rates.

Energy prices increased by 22.14 percent, accelerating from a 25.76 percent increase in October, while food prices fell somewhat (27.11 percent vs 27.41 percent). Core inflation, which excludes volatile commodities like food and energy, increased to 17.62% in November from 16.82% in October. Consumer prices increased 3.51 percent on a monthly basis, above estimates of a 3% increase.

In November 2021, Turkey’s producer price inflation increased to 54.62 percent year on year, up from 46.31 percent the previous month. It was the highest rate since April 2002, as the lira plummeted to multi-year lows over the month on fears about the central bank’s credibility and the potential of interest rate cuts in the face of public criticism and increasing inflation.

Turkey’s economic confidence index fell by 2% to 99.3 in November 2021 from 101.4 the previous month. This was the lowest reading since June, as sentiment declined most among consumers (71.1 vs 76.8 in October), manufacturers (112.0 vs 111.3), and service providers (119.4 vs 120.3), but improved somewhat for merchants (121.9 vs 121.1) and builders (119.4 vs 120.3). (93.6 vs 92.7).