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The Turkish lira's rapid recovery over the past few days proved those calling for higher interest rates wrong, Minister of Treasury and Finance Nureddin Nebati said yesterday (December 23).
"In three days, we have come to this point with our own means. It was a strong answer to those who were saying, 'High interest rates are the final solution to this'," Nebati told the pro-government NTV channel during a live broadcast.
On December 20, President and Justice and Development Party (AKP) Chair Recep Tayyip Erdoğan announced a new measure in which the Treasury will compensate lira depositors for foreign currency fluctuations while encouraging citizens to move to Turkish lira-based assets.
CLICK - Details of Turkey's new foreign exchange-protected deposit system
Following the announcement, the lira recovered from 18.36 to 12.46 to the US dollar in a day.
"There were speculations and manipulations in foreign exchange rates until Monday night. [The lira] will reach its optimal level," said Nebati.
Under the new facility, if the yield remains below the exchange rate difference between the account opening and its maturity dates despite the earned interest, the agency will compensate the depositor.
Nebati said the new foreign exchange-protected Turkish lira deposits stood around 10 billion lira as of Thursday morning, and would continue to increase.
Starting from September, the Central Bank cut interest rates for four months in a row, triggering a massive depreciation in the lira. The exchange rate of the US dollar was less than 8.50 lira before the rate cut in September. (HA/VK)
