Turkey’s banking watchdog threatens legal action over critical comments on exchange rate

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Turkey’s Banking Regulation and Supervision Agency (BDDK) has announced that it will take legal action against people who share critical comments on social media regarding the “positive course of” the exchange rate with the aim of “manipulation,” local media reported on Tuesday.

The agency early on Tuesday released a written statement on Twitter saying that they had observed that there were people attempting to “manipulate the positive course of exchange rate movements” through visual, print and social media.

“The necessary investigations into these people will be carried out and [then] a criminal complaint will be made to the Chief Public Prosecutor’s Office. Our institution closely follows all such attempts [of manipulation],” the BDDK added.

The warning comes after Turkish President Recep Tayyip Erdoğan on Monday introduced a series of measures to prevent further dollarization and encourage savings in lira.

The government will make up for losses incurred by holders of lira deposits should the lira’s declines against hard currencies exceed interest rates promised by banks, the president said after chairing a cabinet meeting in Ankara.

Turkey’s lira on Monday posted its biggest gain in decades, rebounding after soaring as much as 20 percent against the US dollar on the same day to a record low of 18.36. It traded at as strong as 11.09 in İstanbul on Tuesday morning, according to Bloomberg, which also said the two-day rally of the lira was the biggest since 1983.

Economists and opposition politicians criticized Erdoğan’s new method, with many saying that the newly announced measures amounted to an indirect interest rate hike and that the Turkish lira would continue surging in spite of them.

Since the beginning of November, the lira has lost a third of its value versus the US dollar.

Under pressure from Erdoğan, Turkey’s technically independent central bank has utilized four rate cuts in a row to decrease its policy rate from 19 percent to 14 percent, sending the lira to historic lows.

Erdoğan, who is widely criticized for subscribing to the unorthodox belief that high interest rates cause high inflation instead of slowing it down, on Monday repeated a defense of his policy, adding that the central bank’s interest rate cuts would bring a fall in inflation — currently above 21 percent -– “within months.”

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