The Magazine for Asian Investors
Turkey’s central bank surprised the market by cutting interest rates at its meeting yesterday, even though inflation has risen above 80%
Turkey’s central bank cut its key interest rate by 1% to 12%, although inflation reached 80.21% in August, the highest level in 24 years, due to a rise in energy and food prices.
The Turkish central bank’s action bucks the trend of central banks around the world raising interest rates to curb inflation.
Previously, the Central Bank of Turkey began to cut interest rates in September 2021 under pressure from Turkish President Recep Tayyip Erdogan. He has already announced the dismissal of several central bank governors for not agreeing with the government’s monetary easing policy.
Erdogan argued that a low-interest-rate policy would boost exports and employment in the country.
The Turkish central bank’s interest rate cuts triggered the lira crisis, which fell 44% last year after foreign investors who doubted the central bank’s independence sold their shares.