Turkey’s central bank has once again cut its benchmark interest, this time lowering it by 150
basis points to 10.5%, despite inflation in the country running at 83%.
Market observers had expected a 100 basis-point rate cut, and the latest move by Turkey’s
central bank caught many economists by surprise.
Consumer prices in the country of 84 million people climbed to a 24-year high of 83.45% in
September. Prices for basic goods in the country have more than tripled this year.
The country’s monetary policy continues to be directed by Turkish President Recep Erdogan
and is focused on economic growth at any cost.
Erdogan has said publicly that he believes raising interest rates increases inflation rather than
lowering it, an assertion that goes against basic economic principles.
The continued interest rate cuts and sky-high inflation have dramatically weakened Turkey’s
currency, the lira, which has lost roughly 28% of its value against the U.S. dollar this year.
Turkey’s government has pursued several strategies to bolster its currency, including
encouraging lira bank deposits and selling dollars for lira.
President Erdogan has said that he wants Turkey’s interest rate down to single-digits by year’s
end.
