Fears that Turkey is on course for a full-scale financial crisis have intensified after the lira plunged to fresh lows against the US dollar. Turkey’s central bank was forced to step in to defend the ailing currency – selling US dollars for lira – after the latest sharp selloff. The lira was at one stage trading at almost 15 to the dollar as currency dealers contemplated the prospect of the latest in a series of interest rates cuts demanded of the central bank by the country’s president, Recep Tayyip Erdoğan. Erdoğan’s insistence that the central bank should keep reducing the cost of borrowing despite annual inflation running at 20% has led to the value of the lira halving during 2021. Official interest rates have been cut from 19% to 15% since September and markets are bracing themselves for another 1-point cut in interest rates on Thursday. Erdoğan was expected to hold talks with the central bank governor, Şahap Kavcıoğlu, the finance minister, Nureddin Nebati, and the heads of state banks in Istanbul on Monday, and some analysts said a crashing lira and the threat of a credit downgrade from the rating agency S&P might force the government to adopt a more cautious approach. Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, said: “Honestly I don’t think they can carry out another 1 percentage point cut this week. The lira has been very volatile for the past few weeks, and S&P has downgraded to a negative outlook. The markets will have very little tolerance to such a move.” At one stage, the lira had fallen 7% against the dollar before mounting a partial recovery to about 14.25 to the dollar on the currency-market intervention by the central bank. Analysts warned, however, that buying lira in the financial markets was likely to provide only a temporary respite. “Last week’s apparent relative stability of the Turkish lira was artificial and non-sustainable. Now we see the buildup pressure unfolding, driving lira weakness to the next level,” Commerzbank said in a note. “Any further attempts of the central bank to stabilise the lira by interventions is probably bound to fail.”