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Turkish central bank keeps interest rate stable despite soaring inflation

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Turkey’s central bank on Thursday kept its main interest rate steady again as the country faces soaring inflation that has put pressure on households and President Recep Tayyip Erdoğan’s government, Agence France-Presse reported.

The bank left its policy rate at 14 percent for the second time in a row after a four-month streak of cuts which caused a currency crisis late last year that decimated people’s purchasing power.

Inflation reached nearly 50 percent in January, a two-decade high that further cut people’s purchasing power.

The Turkish lira lost 44 percent of its value against the dollar in 2021.

Erdoğan vehemently opposes high interest rates, claiming they are the “mother and father of all evil” and cause high inflation. Central banks normally raise rates to tame inflation.

He has claimed his unorthodox thinking on monetary policy is part of a “war of economic independence” which aims to move Turkey away from relying on foreign capital inflows.

The cost of living crisis could put pressure on his government’s hopes for victory ahead of a general election expected in 2023.

On Saturday, Erdoğan cut sales tax on dairy products, fruit, vegetables and other basic food items from eight to one percent, and vowed to help with rising energy bills.

The yearly increase in food prices was over 55 percent in January’s reading.

The Turkish finance minister said earlier this month inflation would peak in April and would fall to single digits by 2023.

Some economists believe inflation will reach around 55 percent in May before falling by the end of the year.

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