Turkey's troubled lira on Monday pared back some of its historic losses after President Recep Tayyip Erdogan announced new currency support measures that analysts interpreted as an indirect interest rate hike.
Erdogan has pushed the central bank to sharply lower borrowing costs despite the annual rate of inflation soaring to more than 20 percent.
The powerful Turkish leader appeared to double down on that approach over the weekend by affirming that his Islamic faith prevented him from supporting rate hikes.
"As a Muslim, I will continue doing what our religion tells us," he said in televised remarks.
Islamic teachings forbid Muslims from receiving or charging interest on loaned or borrowed money.
High interest rates are a drag on activity and slow down economic growth. Central banks raise their policy rates out of necessity when inflation gets out of hand.
Yet analysts said Erdogan bowed to market pressure and raised interest rates by stealth when he announced a complex series of measures Monday aimed at boosting the lira.
They include a new debt instrument that compensates the value of Turks' bank deposits that they lose due to the lira's depreciation.
Erdogan did not explain how this instrument would work.
But former Turkish treasury adviser Mahfi Egilmez called it an "indirect interest rate hike".
"If the exchange rate increases by 40 percent, and the interest rate increases by 14 percent, 26 percentage points will be paid in compensation," the economist wrote on Twitter.
Fellow Turkish economist Refet Gurkaynak called it an "epic interest rate hike".
The lira reversed a 10 percent loss Monday into a 10 percent gain after Erdogan's announcement.
The Turkish currency has still lost a third of its value against the dollar since the start of November.
- Fight with big business -
Turkey's nominally independent central bank -- stacked in the past year with Erdogan's allies and supporters -- had used four successive rate cuts to lower its policy rate to 14 percent from 19 percent.
Diplomats think Erdogan believes that economic growth at all costs will help him extend his rule into a third decade in an election due by mid-2023.
Erdogan last month launched a self-declared "economic war of independence" aimed at breaking Turkey's reliance on foreign investment and the fluctuating cost of imports such as oil and natural gas.
But the policy has met increasing resistance from influential business leaders who had largely rallied around Erdogan during his 19-year rule.
The TUSIAD lobby of major exporters issued an unusually firm rebuke of the president over the weekend.
"The policy choices implemented here are not only creating new economic problems for businesses, but for all of our citizens," the big business lobby said.
"It is urgent that we assess the damage that has been done to the economy, and quickly return to the implementation of established economic principles, within the framework of a free market economy."
Erdogan attacked TUSIAD directly after announcing his new measures following a weekly cabinet meeting.
"You are scheming to topple the government," he told members of the industrial lobby.
"Do not hold out your hopes in vain. You're dreaming. You will have to wait until June 2023," he said in reference to the date of the next scheduled election.