The first, rather hesitant actions of the new financial staff Türkiye in the direction of orthodox monetary policy they led it Turkish pound fell by 7%, and its exchange rate is at a record low of 23.16 pounds per dollar.

Under his new leadership Mehmet SimsekThe Treasury Department has instructed the central bank and state banks to end costly foreign exchange intervention policies as part of a policy change.

This was reported by sources close to the relevant decisions, who wished to remain anonymous, while the Bank of Turkey and the Ministry of Finance refrained from commenting on this matter. However, when the Turkish currency began to fall by more than 6% and the exchange rate was 23.1734 Turkish liras to one dollar, the Ministry of Finance closed and allowed new interventions in the foreign exchange market.

The appointment of Mehmet Simsek, a former Merrill Lynch chief executive, as the new finance minister raised expectations that Turkey would return to orthodox monetary policy and end government intervention, leaving the market to determine the value of Turkish bonds. Political and economic analysts constantly remind that Erdogan in the past, this has allowed the central bank to resort to orthodox monetary policy. Since May 28 and Erdogan’s re-election, the Turkish lira has depreciated by more than 13% against the dollar.

Investors discount further currency slippage by betting that the Turkish currency has an 80% chance of falling to 25 pounds per dollar in the next three months and a more than 60 percent chance of falling to 27 pounds per dollar. It should be noted that Goldman Sachs also now predicts that in the next 12 months the Turkish lira will depreciate even more, and its rate against the dollar will reach 28 pounds per dollar.

Under the new leadership of Mehmet Simsek, the Ministry of Finance ordered an end to interventions in the foreign exchange market.

However, unlike the lira, the price of other Turkish securities shows that the market has confidence in the expected policy change. The main Turkish stock market indexes rose by 3.3%, and in total since Erdogan’s re-election, they have accumulated a gain of 22%. Turkish dollar bonds rose similarly, with their spread against US Treasuries narrowing 44 basis points during the week, according to the JP Morgan Chase & Co. index.

The central bank’s next meeting will take place on June 22, when it is expected to start raising interest rates under its new leadership, who will replace current governor Sahap Kavtsioglu.

The leading candidate to replace Cavcioglu is Havize Gay Erkan, who has experience as a US bank executive, who met with Simsek on Monday. Erkan was the head of Goldman Sachs for almost a decade, and about a year and a half ago he was co-CEO of First Republic Bank, which went bankrupt a year after she left. It was the second largest American bank failure.

Simsek and the economic staff of Erdogan’s new government will face intractable problems as the Turkish lira’s fall exacerbates inflationary pressures as the country enters a new campaign period for local elections due next year.