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Unfazed by lira’s decline, Turkey persists with lowering interest rates

Turkey’s lira currency is coming under pressure as investors fret about the government’s threats to invade Syria to confront Russian-backed regime troops as well as policy-makers’ efforts to flood the economy with cheap loans to boost growth.

Airstrikes killed two Turkish soldiers on Thursday in the northwest region of Idlib, bringing the number of Turkish servicemen killed there in the last month to 15. Turkey retaliated, killing more than 50 Syrian troops, the Defense Ministry said. The violence follows President Recep Tayyip Erdogan’s warning on Wednesday that an offensive in Syria was only “a matter of moments.”

Turkey has spent the last several weeks sending troops and equipment across the border to areas still under rebel control, worried that the Syrian government’s assault on Idlib, the opposition’s last stronghold after nine years of war, will force civilians across its border. Some 900,000 people have been displaced in Idlib since December. Turkish negotiations with Russia, Syrian President Bashar al-Assad’s main backer, have so far failed to slow his offensive.

The lira hit a nine-month low on Thursday at 6.09 to the dollar, one day after the central bank cut interest rates by a half percentage point despite inflation that is stuck in the double digits. The currency broke through the psychologically important level of 6.00 earlier this month.

Governor Murat Uysal has lowered rates at each of the six monetary policy meetings he has chaired since taking the job in July. Erdogan fired Uysal’s predecessor for refusing to lower borrowing costs after hiking the benchmark rate to 24% in late 2018 to rescue a spiraling lira during a currency crisis that saw the economy slip into recession last year.

Read more: al-monitor

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