ANKARA: Turkey’s lira tumbled more than 2% on Wednesday as worries grew over a surge in inflation and depleted official reserves, fuelled by President Tayyip Erdogan’s pledge this week to continue cutting interest rates.

The lira weakened as far as 17.15 to the dollar, near the record low of 18.4 it hit on Dec. 20 during a currency crisis triggered by a series of unorthodox interest rates cuts.

The currency has weakened in 12 of the last 14 sessions and has shed 23% this year, after a 44% loss last year. The depreciation, combined with annual inflation of 73%, has left households badly strained ahead of elections set for mid-2023.

Erdogan set off the latest bout of weakness after a cabinet meeting on Monday when he said Turkey will not raise rates but rather continue cutting them in the face of high living costs.

“Given the imbalances, an economic soft-landing seems to be the best-case scenario but achieving that is not going to be easy or desirable ahead of the elections,” said Emre Akcakmak, Dubai-based senior consultant to East Capital.

The central bank has used its foreign reserves to support the lira since the December crisis, prompting traders to call it a managed market or a “dirty float”.

Government officials are looking for exchange-rate sustainability, a senior banker told Reuters, adding that corporate foreign currency demand due to import payments was observed in the market.

—Reuters