The embattled Turkish lira hit a new low late Aug. 1, breaking the psychological mark of 5 against the dollar as Washington slapped unprecedented sanctions on Ankara in a simmering row over a detained American pastor. The mounting bilateral tensions and their economic impact come atop alarming signs of how President Recep Tayyip Erdogan will handle the ailing economy under the one-man rule he has been building since his victory in the June elections. Though few in Ankara would admit it, the prospect of Turkey running for aid from the International Monetary Fund (IMF) is looming large.

The new Cabinet that Erdogan formed after the elections had to grapple with growing economic woes immediately after it took office. Among the Cabinet members, the president entrusted the biggest authority to his son-in-law, Berat Albayrak, by appointing him treasury and finance minister and attaching the central bank to his ministry. Though Erdogan had ostensibly delegated powers, he seemed to cast a long shadow on both Albayrak and the central bank when the latter convened July 24 to make a decision on interest rates and send the first major signal on how Erdogan’s new administration would run the economy.

The markets anticipated a hike of at least 100 basis points to prop up the Turkish lira and curb the menacing rise of hard-currency prices. Albayrak reinforced the anticipation, pledging ahead of the meeting to not fight with the markets and instead pursue “a win-win relationship” with them. But the meeting ended with a shocking decision to keep the policy rate unchanged, which markets perceived as a direct order by Erdogan, given his well-known aversion to high interest rates and unconventional economic views that have long perturbed investors.

The lira, which was gaining ground toward 4.6 against the dollar ahead of the meeting, nosedived anew. The greenback’s price ultimately broke the 5 lira psychological mark Aug. 1 as the United States imposed sanctions on two ministers over Ankara’s refusal to release pastor Andrew Brunson, who Washington said is “the victim of unfair and unjust detention by the government of Turkey.”