Erdogan Unbowed by Critics, Leaving Little Stopping Lira’s Collapse

Turkish President Recep Tayyip Erdogan addresses his supporters during a ceremony in Istanbul, Turkey, November 5, 2021. (Reuters)
Turkish President Recep Tayyip Erdogan addresses his supporters during a ceremony in Istanbul, Turkey, November 5, 2021. (Reuters)
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Erdogan Unbowed by Critics, Leaving Little Stopping Lira’s Collapse

Turkish President Recep Tayyip Erdogan addresses his supporters during a ceremony in Istanbul, Turkey, November 5, 2021. (Reuters)
Turkish President Recep Tayyip Erdogan addresses his supporters during a ceremony in Istanbul, Turkey, November 5, 2021. (Reuters)

Little stands in the way of Turkey's currency collapse expanding into a deeper economic crisis after President Recep Tayyip Erdogan ignored appeals, even from within his government, to reverse policy, according to top officials and analysts.

Two people familiar with internal discussions said some government officials are uncomfortable with Erdogan's rate-cutting strategy and told him this. But they have not convinced him, and others have given up trying, they said.

This could set the stage for an intensifying showdown between rattled investors and local savers on one side and on the other, Erdogan - who has dismissed several ministers and top bureaucrats who previously were able to challenge and persuade him on some policy decisions.

"Some people who wanted to convey the opinion to the president that a different policy should be followed were not successful in this," said a senior official in the ruling AK Party, requesting anonymity.

"There is a very strict attitude from the presidency that the current practice will continue, interest rates will be kept low and inflation will decrease along with it."

The presidential office did not immediately respond to a request for comment.

Twice in the last week Erdogan has pledged publicly to see through his battle against high interest rates, dumping fuel on a fire sale of Turkish assets and sending the lira plunging as much as 23% in that period.

Though the currency recouped some losses on Wednesday, anxious Turks say the collapse has upended their family budgets and future plans.

Economists say if Erdogan doesn't reverse course and free up the central bank to hike rates, Turkey faces soaring inflation and possible corporate or bank defaults.

But unlike during 2018's currency crisis - when the central bank jacked up rates, albeit late, to stem the bleeding - there is little prospect of a quick intervention this time.

"The general view at the presidency is that if this policy continues for a few more months, the process will reverse and the exchange rate will fall ... so it appears it will remain in place," said the second source familiar with internal talks.

"The views of some officials ... who do not think these policies are right do not appear to be taken into consideration."

Goldman Sachs analyst Murat Unur said the risk of dollarization remains "very high" given the rush to purchase hard currencies, which already account for more than half of Turks' deposits.

"The current macroeconomic policy mix is not sustainable but the authorities have clearly shown that they prefer low rates and are willing to implement them even if this leads to significant pressure on the lira," he said in a note.

Erdogan unmoved

Erdogan has long espoused the unorthodox view that high interest rates cause inflation and has promised to prove the doubters wrong in what he calls an "economic war of independence" ahead of elections in 2023.

To test his theory, Erdogan has overhauled the central bank leadership and pressed it to slash the policy rate by 400 basis points since September, to 15%, despite inflation running near 20% - and much higher for basic goods like food.

Some of those who in the past advised Erdogan have recently criticized the monetary easing that the president says will stoke exports, investment and jobs.

Economists say inflation could blow through 30% unless steps are taken to reverse the currency depreciation, which raises import prices.

But there is no apparent circuit breaker, especially after Erdogan installed a like-minded governor, Sahap Kavcioglu, at the bank in March and fired the last remaining orthodox policymakers last month.

Treasury and Finance Minister Lutfi Elvan, also seen as a moderate, has kept out of the spotlight and there has been speculation he too could be ousted, though the Palace has not commented.

The central bank left the door open for another rate cut next month - a move Erdogan likely still supports.

Koc University-TUSIAD Economic Research Forum director Selva Demiralp said continued easing will only cancel out any benefits from higher demand.

"Even short term benefits from rate cuts cease to exist if the central bank insists on cutting rates and disregards inflation," said the former US Federal Reserve economist.

The central bank, already lacking credibility, said on Tuesday it would only intervene at times of "excessive volatility" - as the lira dove 15% in its second-worst day ever.

Analysts say authorities could redouble efforts to secure foreign currency swap lines from allies, which could help in any necessary interventions given official reserves remain thin.



China to Boost Exports, Imports in 2026, Seeking ‘Sustainable’ Trade, Official Says

A woman walks in Ritan park one day after a heavy snowfall in Beijing on December 13, 2025. (AFP)
A woman walks in Ritan park one day after a heavy snowfall in Beijing on December 13, 2025. (AFP)
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China to Boost Exports, Imports in 2026, Seeking ‘Sustainable’ Trade, Official Says

A woman walks in Ritan park one day after a heavy snowfall in Beijing on December 13, 2025. (AFP)
A woman walks in Ritan park one day after a heavy snowfall in Beijing on December 13, 2025. (AFP)

China plans to expand exports and imports next year as part of efforts to promote "sustainable" trade, a senior economic official said on Saturday, state broadcaster CCTV reported.

The trillion-dollar trade surplus posted by the world's second-largest economy is stirring tensions with Beijing's trade partners and drawing criticism from the International Monetary Fund and other observers who say its production-focused economic growth model is unsustainable.

"We must adhere to opening up, promote win-win cooperation across multiple sectors, expand exports while also increasing imports to drive sustainable development of foreign trade," Han Wenxiu, deputy director of the Central Financial and Economic Affairs Commission, told an economic conference.

China will encourage service exports in 2026, Han said, pledging measures to boost household incomes, raise basic pensions and remove "unreasonable" restrictions in the consumption sector.

He restated the government's call to rein in deflationary price wars, dubbed "involution", where firms engage in excessive, low-return rivalry that erodes profits.

The IMF this week urged Beijing to make the "brave choice" to curb exports and boost consumer demand.

"China is simply too big to generate much (more) growth from exports, and continuing to depend on export-led growth risks furthering global trade tensions," IMF Managing Director Kristalina Georgieva told a press conference on Wednesday.

Economists warn that the entrenched imbalance between production and consumption in the Chinese economy threatens its long-term growth for the sake of maintaining a high short-term pace.

Chinese leaders promised on Thursday to keep a "proactive" fiscal policy next year to spur both consumption and investment, with analysts expecting Beijing to target growth of around 5%.


UK Economy Unexpectedly Shrinks in October

People exit the London Underground station at Bank, outside the Bank of England (L) and the Royal Exchange building (back R) in central London on December 12, 2025. (Photo by HENRY NICHOLLS / AFP)
People exit the London Underground station at Bank, outside the Bank of England (L) and the Royal Exchange building (back R) in central London on December 12, 2025. (Photo by HENRY NICHOLLS / AFP)
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UK Economy Unexpectedly Shrinks in October

People exit the London Underground station at Bank, outside the Bank of England (L) and the Royal Exchange building (back R) in central London on December 12, 2025. (Photo by HENRY NICHOLLS / AFP)
People exit the London Underground station at Bank, outside the Bank of England (L) and the Royal Exchange building (back R) in central London on December 12, 2025. (Photo by HENRY NICHOLLS / AFP)

Britain's economy unexpectedly contracted again in October, official data showed Friday, dealing a blow to the Labour government's hopes of reviving economic growth.

Gross domestic product fell 0.1 percent in October following a contraction of 0.1 percent in September, the Office for National Statistics said in a statement.

Analysts had forecast growth of 0.1 percent.

Manufacturing rebounded in the month as carmaker Jaguar Land Rover resumed operations after a cyberattack that had weighed on the UK economy in September, AFP reported.

But analysts noted that businesses and consumers reined in spending ahead of Britain's highly-expected annual budget.

"Business and consumers were braced for tax hikes and the endless speculation and leaks have once again put a brake on the UK economy," said Lindsay James, investment manager at Quilter.

Prime Minister Keir Starmer's Labour party raised taxes in last month's budget to slash state debt and fund public services.

At the same time, Britain's economic growth was downgraded from next year until the end of 2029, according to data released alongside the budget.

Finance Minister Rachel Reeves raised taxes on businesses in her inaugural budget last year -- a decision widely blamed for causing weak UK economic growth and rising unemployment.

She returned in November with fresh hikes, this time hitting workers.
Analysts said that Friday's data strengthened expectations that the Bank of England would cut interest rates next week.


Gold Hits Seven-week High on Safe-haven Demand; Silver Notches Peak

FILE PHOTO: A goldsmith works on a gold necklace at a workshop in Ahmedabad, India, October 8, 2025. REUTERS/Amit Dave/File Photo
FILE PHOTO: A goldsmith works on a gold necklace at a workshop in Ahmedabad, India, October 8, 2025. REUTERS/Amit Dave/File Photo
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Gold Hits Seven-week High on Safe-haven Demand; Silver Notches Peak

FILE PHOTO: A goldsmith works on a gold necklace at a workshop in Ahmedabad, India, October 8, 2025. REUTERS/Amit Dave/File Photo
FILE PHOTO: A goldsmith works on a gold necklace at a workshop in Ahmedabad, India, October 8, 2025. REUTERS/Amit Dave/File Photo

Gold prices rose to a seven-week high on Friday, bolstered by a soft dollar, expectations of interest rate cuts and safe-haven demand prompted by geopolitical turbulence, while silver hit a record high.

Spot gold rose 0.7% to $4,311.73 per ounce by 0945 GMT, its highest level since October 21, and set for a 2.7% weekly gain, Reuters reported.

US gold futures gained 0.7% to $4,343.50.

The dollar hovered near a two-month low, and was on track for a third straight weekly drop, making bullion more affordable for overseas buyers.

Additionally, "the sharp rise in US weekly jobless claims as well as US-Venezuela tensions are underpinning gold and keeping haven demand strong," said Zain Vawda, analyst at MarketPulse by OANDA.

US jobless claims rose by the most in nearly 4-1/2 years last week, reversing the sharp drop seen in the previous week.

The US Federal Reserve trimmed rates by 25 basis points for the third time this year on Wednesday, but indicated caution on additional cuts.

Investors are currently pricing in two rate cuts next year, and next week's US non-farm payrolls report could provide further clues on the Fed's future policy path.

Non-yielding assets such as gold tend to benefit in low-interest-rate environment.

On the geopolitical front, the US is preparing to intercept more ships transporting Venezuelan oil following the seizure of a tanker this week.

Meanwhile, India saw widening gold discounts this week as demand remained subdued despite the wedding season, while high spot prices also dented demand in China.

Spot silver rose 0.5% to $63.87 per ounce, after hitting a new record high of $64.32/oz, and is headed for a 9.5% weekly gain.

Prices have more than doubled this year, supported by strong industrial demand, dwindling inventories and its inclusion on the US critical minerals list.

"Silver is supported by industrial demand amid fears of shortages, a continued tight market, and the speculative frenzy, mostly from retail investors which has helped drive inflows to Silver ETFs," said Ole Hansen, head of commodity strategy at Saxo Bank.

Elsewhere, platinum was up 0.8% at $1,708.11, while palladium climbed 2.2% to $1,516.95. Both were headed for a weekly rise.