The Turkish lira is down 3.38% at 4.8983 per dollar after Turkey’s central bank unexpectedly held its key interest rate at 17.75% on Tuesday.

Economists were expecting a 100-basis-point hike.

The decision comes just a month after the reelection of President Recep Tayyip Erdogan won reelection.

Watch the lira trade in real time here.

The Turkish lira tumbled on Tuesday after the country’s central bank unexpectedly held its key interest rate. It’s currently trading down 3.38% at 4.8983 per dollar, and is threatening its record low of 4.9743.

The Central Bank of the Republic of Turkey left its benchmark interest rate unchanged at 17.75%, shocking economists surveyed by Bloomberg who were anticipating a 100 basis point hike.

“Recently released data indicate a more significant rebalancing trend in the economic activity,” the bank’s statement said. “External demand maintains its strength, while signs of deceleration in domestic demand become more visible.”

Turkey’s central bank has been hiking rates sharply in recent months in an effort to stem its sliding currency. In May, it announced an emergency 300-basis-point hike as the lira touched a then record low. Its one-week repo rate was at 8% as recently as April.

Tuesday’s decision comes just one month after President Recep Tayyip Erdogan won reelection. He is a self-proclaimed “enemy” of interest rates, and said in May that if he won reelection he would take more responsibility for Turkey’s economy.

“A no-change or a ‘marginal’ hike of 25-50bp would be Lira negative, and could prompt front-end rates to price in a higher probability of emergency tightening at some point in the not too distant future,” a team of Nomura analysts led by Craig Chan wrote in a recent note to clients.

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The Turkish lira has plunged 29.5% this year versus the US dollar.

Foto: sourceMarkets Insider