Commerzbank expert Leuchtmann on the currency crisis in Turkey

Mr. Leuchtmann, the lira is losing value at breakneck speed, up to 18 percent on Tuesday. Where does it end?

Andreas Mihm

Business correspondent for Austria, East-Central and Southeastern Europe and Turkey based in Vienna.

The devaluation of the lira has gained momentum of its own. It feeds inflation, and inflation feeds devaluation. How far that will go is difficult to predict.

But it can’t go on like this in the long run.

There will have to be a rethink in the monetary policy of the Turkish central bank. It will have to hike rates because the lira depreciation is so massive that it is throwing the country into big trouble. This first affects companies that are indebted in foreign currencies. But we don’t see any change yet, rather the opposite. The central bank is cutting rates instead of raising them, and the president is cheering them on. The question is: When will the economic damage be so great that readjustment will take place? But that is not an economic, but a political or even psychological question. That is why it is so difficult to answer.

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