Turkey’s Central Bank Makes First Interest Rate Cut In 2 Years
Turkey’s central bank cut its key interest rate by 2.5 percentage points on Thursday amid high inflation. This was the first rate cut in almost two years. The bank’s Monetary Policy Committee announced it lowered its one-week repo rate from 50% to 47.5% due to slowing inflation.
The overall inflation trend in November was “flat,” according to a statement from the committee, and there are indications that it will likely fall in December.
It claimed that the country’s slowing demand was assisting in lowering inflation. Declining foreign reserves and President Recep Tayyip Erdoğan’s unconventional economic policy of lower rates to tame inflation—a policy he later abandoned—were the main causes of Turkey’s recent inflation spike.
Independent economists claim that the real inflation reading is significantly higher than the official figures, but it peaked at 85% in late 2022 and was at 47% in November. The Turkish central bank increased interest rates from 8 percent to 50 percent between May 2023 and March 2024 after reverting to more traditional policies under a new economic team.
The apex bank had maintained rates at 50% before the rate cut on Thursday. Many households find it difficult to pay for necessities like food and housing because of the high rate of inflation.
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