>> Turkey's currency keeps tumbling. And a big rate hike hasn't stopped the rot. The lira down another 2% Thursday, that despite a three percentage point in rise rates the day before. The currency now down by a fifth this year, and it's having a dramatic effect on the purchasing power of Turks, especially for shopkeepers like this who pay their bills in dollars.
>> Our rent is $5,000. Last year that was 17,000 Turkish lira. This year it will soon be 25,000 lira.>> Investors have dumped the lira over concerns about President Tayyip Erdoğan's plan for the economy. He wants to take greater control of monetary policy after the upcoming election in June.
That's due to hand him greater powers after a referendum approved the creation of an executive presidency. But Erdoğan and investors don't see eye to eye. He wants low interest rates, so that it's cheap for Turks to borrow. Investors, however, see high interest rates as necessary to stabilize Turkey's inflation.
Now the financial turmoil could cause problems for Erdoğan at the election.>> President Tayyip Erdoğan, of course, remains very popular in Turkey. He has a devoted base of roughly half the country and his core supporters, middle class and working class pious Turks absolutely love him. Yet these are the same people who have seen their purchasing power eroded by the tumbling lira.
>> Wednesday's rate increase was a shock. It took the country's benchmark borrowing rate to 16.5%. Now the question is how Erdoğan will respond to a hike he had opposed. Following the bank's decision, he only said quote, the necessary things will be done for financial stability