Turkish central bank kept its main interest rate unchanged despite the expectations of the markets for its hike. The Turkish lira lost 3.35% of its value to about 4.8983 TRY per dollar because of concerns about the bank’s independence amid tightening the control of President Recep Tayyip Erdogan on the Turkish economy.

In its first monetary policy decision, after Erdogan was re-elected president and gained extensive executive powers, the Turkish central bank kept the key interest rate unchanged at 17.75%.

The decision may raise concerns that the bank is failing to cope with inflation, which reached 15.4% last month. This is its highest growth on an annual basis in 15 years. These fears have prompted the Turkish lira to lose about a quarter of its value against the US dollar since the beginning of the year. The investors worry that the president will use his tightened control over the central bank to keep excessively loose monetary policy.

During his election campaign, Recep Tayyip Erdogan said he would encourage lower interest rates to support investment and consumer demand.

The investors ask questions about the independence of the Turkish Central Bank after Erdogan secured the right to appoint the governors of the institution and appoint his brother-in-law Berat Albayrak as finance minister. Хе says тхат these concerns are unfounded. On his return from a G20 finance ministerial meeting in Argentina this weekend, he told Turkish reporters that the government would not fight the markets.

“One of our main goals is an effective central bank in all processes”, said Berat Albayrak.

The rise in value of the US dollar this year has punched some vulnerable emerging markets. The analysts say Turkey is particularly worried about the years of credit-stimulated economic growth, resulting in banks and companies in the country accumulating debt for about 230 billion USD. Many Turkish companies, which receive their revenues in local currencies, fail to service their dollar-denominated and euro-denominated loans.