The Magazine for Asian Investors
The Turkish central bank surprises the markets with an interest rate cut despite inflation of almost 80%.
It lowered the key interest rate by 1% to 13%, after it had been at 14% for seven months.
Inflation in Turkey rose to 79.6% in July, the highest level in 24 years, as energy and food prices rose again.
Previously, the Turkish central bank had started cutting interest rates in September 2021. Under pressure from the Turkish head of state, who had previously announced the dismissal of several central bank governors, it continuously cut interest rates by a total of 5.00%.
This is due to the government’s loose monetary policy. It claims that the low interest rate policy will boost exports and employment in the country.
However, the Turkish central bank’s interest rate cut triggered the lira crisis, which has seen the currency fall 44% in the past year after foreign investors, who doubted the central bank’s independence, dumped their holdings.