Turkey’s central bank continues lowering interest rates with small cut

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This picture is taken on April 10, 2018 in Istanbul shows a screen displaying foreign exchange rates against Turkish liras as a man looks to the rates at Istiklal avenue. / AFP PHOTO / OZAN KOSE

Turkey’s central bank lowered its key interest rate by 50 basis points to 10.75 percent as expected on Wednesday, its sixth consecutive rate cut and the smallest so far in an aggressive easing cycle designed to boost economic growth, Reuters reported.

The bank cut its benchmark one-week repo rate from 11.25 percent, pushing real rates deeper into negative territory for locals with lira deposits after year-on-year inflation rose to 12.15 percent in January.

“Considering all factors affecting the inflation outlook, the Committee decided to make a more measured cut in the policy rate,” the bank said in a statement after its monetary policy meeting.

Inflation has dropped from a peak above 25 percent in the wake of a 2018 currency crisis that cut the Turkish lira’s value by nearly 30 percent. The subsequent brief recession saw economic growth all but disappear in 2019.

The central bank responded to the crisis by raising its policy rate to 24 percent, where it had stayed until last July.

The lira weakened to 6.08 against the dollar after the central bank move, compared with 6.0545 beforehand.

The bank has slashed its policy rate by 1,325 basis points since July.

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1 COMMENT

  1. Everybody, not just skilled economists, knows that lowering interest rates encourages more borrowing and increased debt. Does Turkey really need any more debt? They have enough to last for decades and, so far, are not showing any reasonable signs of paying it off anytime soon – other than taxing its own citizens out of existence. Many Turks would agree that this has already happened.

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