By Ezgi Erkoyun, Nevzat Debranoglu

ISTANBUL (Reuters – On Thursday, the Turkish lira plunged to 15 against the dollar at an all-time low ahead of another central bank expected cut in interest rates. The cuts are consistent with President Tayyip Erdoan’s dangerous economic plan.

At 0701 GMT, the lira was at 15.2 and had fallen as low as 2.9% from 15.25. This year has seen a more than twofold increase in the U.S. dollar’s value relative to the lira, which is threatening Turkey’s large emerging market economy.

A Reuters poll shows that despite the fact that inflation has risen above 21% the central bank will likely reduce its key rate to 14% later in the day.

Erdogan has been given the task of leading this experiment. Istanbul Analytics’ economist Guldem Abay stated that interest rates will be reduced as best as they can.

Erdogan’s plan for prioritising exports, lending and the Bank has reduced its key rate 400 basis points to 15%. Opposition lawmakers and economists have both widely criticized this reckless policy.

In the past two weeks, the bank intervened on the forex market 4 times. It sold dollars in an attempt to stop the selling. At 1100 GMT, it will announce the decision on rates.

The central bank targets inflation of 5%, but this inflation pressure will only last for a short time and is necessary in order to increase economic growth and balance current accounts.

Economists believe that inflation will rise to 30% in the next year, largely due to rising import prices.

Central bank signaled it would reduce rates this month after a pause in January. It stated last month that it will consider “completing its use of the limited space” for December easing.

Analysts say Erdogan has restructured the leadership of the central bank this year. He mainly fired orthodox policymakers, and replaced them with more like-minded people, which leaves its credibility in disarray.

Additionally, the U.S. Federal Reserve’s decision to be hawkish on Wednesday and end its bond buying stimulus in March was detrimental to the currency. The Fed also projects three U.S. interest rates increases next year to address rising inflation.

U.S. policy tightening may put pressure on emerging markets currencies, such as the lira. Although the odds of a Fed raise by May are good, there is still a chance that more Fed increases will be made by September or December. Three quarter-point rate rises may not fully price until February 2023.