Sunday September 24, 2023

Turkish central bank cuts rate for fourth month

November 25, 2022

Istanbul: Turkey´s central bank said on Thursday it had cut its main policy rate for the fourth consecutive month despite high inflation.

On the wishes of President Recep Tayyip Erdogan, the bank said it had lowered its benchmark rate from 10.5 percent to nine percent.

With the latest cut, the rate has reached "a sufficient level with regard to growing risks concerning global demand", the bank´s council said in a written statement.

It has therefore "decided to put an end to the cycle of lowering interest rates which began in August", it added.

Erdogan had vowed to lower interest rates to single digits by the end of the year as he prioritises economic growth and jobs over price stability ahead of a general election next June.

Last year, interest rates fell from 19 percent in September to 14 percent in December.

Erdogan had called for a single-digit interest rate by the end of the year. He is counting on lower borrowing costs to propel the economy as Turkey gears up for presidential and parliamentary elections next June.

The bank had similarly cut borrowing costs by 1.5 points last month and by 1 point each in August and September. They remained stable this year until the summer but have been cut every month since, while inflation has soared.

Turkey´s monetary policymakers are bucking the global trend of central banks raising interest rates to combat inflation, as high borrowing rates cool down the economy and prices.

Erdogan, a vocal opponent of higher borrowing costs, has called high interest rates his "biggest enemy".

But the unconventional economic model has contributed to a plunge in the value of the lira.

The Turkish currency has fallen 28.5 percent against the dollar since the beginning of January, after losing 44 percent last year.

Turkish inflation surged past 85 percent in October, its highest level since 1998, official data shows.