The Turkish Central Bank cut interest rates at its meeting that ended just moments ago, by 200 basis points, exceeding expectations that it would cut by 50-75 points, to reach 16%, after it cut interest rates on the 23rd of last September by 100 basis points to surprise the markets once again. In September, the Turkish lira incurs further losses.
The interest statement issued by the bank stated that the factors supporting the rise in inflation are considered temporary and that the bank will use all available tools to support the decline in inflation and stressed that the strict policy will have a higher than expected impact on commercial loans.
The Turkish lira has recorded a series of declines since the beginning of October, as it tested levels of 9.37 at the beginning of the week, amid rising expectations in the markets that the Turkish Central Bank will repeat its previous decision and cut interest rates at its meeting today, Thursday, ignoring the inflation hikes that reached 19.58% in September, the highest level since March from The year 2019, when Turkish Prime Minister Recep Tayyip Erdogan adopts an economic theory that contradicts all global theories by saying that lowering interest rates is the way to reduce inflation and not the other way around, as most economists around the world see, and therefore the Turkish Central Bank is constantly directed and pressured to reduce interest rates.
After US President Recep Tayyip Erdogan fired three members of the Turkish central bank’s interest rate-setting committee last week, expectations rose that the decision to cut rates would be taken unanimously at Thursday’s meeting after getting rid of hawkish monetary policymakers.
The latest economic data released this morning, Thursday, showed a decline in consumer confidence in Turkey to its lowest level since February 2009 in October at 76.8 points, down by 3.6 points from the September reading, which reflects the pessimism of investors and individuals after the damage to the Turkish lira, in addition to investors’ fears of interventions.
And the pressures exerted by Turkish President Recep Tayyip Erdogan with his interventions in the policy of the Turkish Central Bank, especially since he has dismissed three heads of the Central Bank in the last 20 months.
After market estimates and Bloomberg and Reuters polls saw a large rate cut between 50-100 basis points, the cut came by 200 points, to stabilize the interest at 16%, and the lira recorded more declines and traded at levels of 9.45 after it was the record level recorded at the beginning of the week at 9.37.
06/11/2024
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