By selling foreign currencies on the foreign exchange market, the Turkish central bank seeks to counter the continuing decline in the value of the lira.

The intervention was due to "unhealthy price developments" on the market, said the monetary authorities.

After the announcement, the lira appreciated by up to 8.5 percent against the dollar, only to give way again in hectic trading.

At lunchtime, more than 13 lira were paid for the dollar and around 14.80 lira for one euro.

That was 3.7 percent less than the previous day.

Nevertheless, buyers for dollars and euros have to shell out around 50 percent more lira than they did a year ago.

Andreas Mihm

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

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The drama of the situation in Turkey shows that after seven years the central bank has again resorted to this means of foreign exchange market intervention, which economists perceived as unsuitable for a longer-term stabilization of the currency.

It was only on Tuesday evening that President Recep Tayyip Erdogan defended his course of tackling rising inflation with falling interest rates.

He is pushing for low interest rates because, he says, they will boost growth, create jobs and help the export industry, which is important for foreign exchange income.

Medicines are becoming scarce

Economists consider this counterproductive and wrong. The key interest rate in Turkey is currently 15 percent, after being 19 percent in March. Another cut is expected this month. The official inflation rate, the informative value of which is doubted by some, is just under 20 percent. Unions are demanding higher minimum wages because there is not enough money to live on.

The inflation rate for November will be announced on Friday.

Analysts estimated it at more than 20 percent - with further increase potential in the coming year.

One reason is the rising prices for imports such as energy raw materials due to the collapse of the currency, but everyday goods such as pharmaceuticals are also becoming more expensive.

The industry is already warning of scarcity here, as state-regulated prices cannot keep up with inflation.

Apple recently stopped selling iPhones, only to resume them after a few days at 25 percent higher prices.

The prices for new and used cars are also skyrocketing.

Scarce financial reserves

Tomas Meißner, Head of Research and Financial Market Strategy at Landesbank Baden-Württemberg, sees the move as an "act of desperation". Interest rate hikes, the means of choice to avert an impending balance of payments crisis, cannot be made with President Erdogan. "The central bank's gold and currency reserves have recovered somewhat in the meantime in 2021, but experience shows that they melt away quickly when intervening in the foreign exchange market," Meißner told the FAZ

In contrast to the crisis of three years ago, the balance of the Turkish trade balance was recently positive, but the high level of foreign debt, especially the portion denominated in American dollars, harbors considerable risks. In the next two years, government bonds in the amount of nearly 50 billion dollars are due. Their refinancing is said to have become significantly more expensive due to the latest, frightening surge in value of the lira, on the other hand, the yields of Turkish government bonds have risen significantly since the beginning of the easing of monetary policy in September 2021.

"It is up to the political leadership of Turkey to end the self-inflicted crisis," said Meißner.

The political leadership must recognize basic economic facts and not further negate them.

It is to be expected that those in charge of the Turkish central bank will initially continue to loyally implement the will of the Turkish president.

"This threatens a further decline in the lira, which is possibly to be stopped by the introduction of exchange controls."