The impact of rising inflation might have been exacerbated by Turkey’s President Tayyip Erdogan’s decision to oust central bank governor Naci Agbal. The lira felt the wrath of the market, plunging 15% to near all-time lows as the markets reacted to the hawkish governor’s firing.
Turkey Inflation Concerns
Agbal was let go barely three days after hiking interest rates in a bid to stem rising inflation levels. The decision did not board well with the president, and he paid the ultimate price. Sahap Kavcioglu, a critic of the high-interest rate, has since been appointed to steer the institution.
The appointment did little to calm the markets as the currency tumbled to 8.4850 against the dollar from 7.2185 before the unprecedented move by Erdogan. Expectations are high that the lira could weaken further given the new governors’ dovish and unorthodox monetary policy measures.
Turkey’s economy is under immense pressure reeling from the effects of COVID-19. Inflation levels have already surged to highs of 16%, with the lira losing ground against the majors. Agbal had tried to stem rising inflation by raising interest rates by 875 basis points to 19% over the last five months.
Last week, the former governor raised interest rates by 200 basis points resulting in a 3% lira rally. His hawkish stance had helped stabilize the currency resulting in a significant decline in its CDS risk gauges.
AstraZaneca COVID-19 Vaccine
As the lira battles its biggest sell-off in recent years, it is a sigh of relief for AstraZeneca after solid US clinical trial results gave its COVID-19 vaccine a clean bill of health.
The results showed that the vaccine developed in partnership with the University of Oxford is 80% effective in people above 65 years. The trial results also showed that the vaccine could prevent serious illnesses and hospitalization across ages and ethnicities.
Standing in the way of the vaccine is regulatory approval by the Food and Drug Administration. The vaccine could be available for use in America as early as May. AstraZeneca has already confirmed plans to have 30 million doses available in the US, with another 20 million doses following later.