Turkey: Another drop for the pound as the Central Bank cut the benchmark interest rate to 9%

Turkey: Another drop for the pound as the Central Bank cut the benchmark interest rate to 9%
Turkey: Another drop for the pound as the Central Bank cut the benchmark interest rate to 9%

The Turkish lira recorded a further decline, as the country’s Central Bank proceeded with another reduction in its key interest rates on Thursday, with the reference rate now falling below 10%.

In particular, the Central Bank of Turkey reduced the benchmark interest rate from 10.5% to 9%, a reduction that is also in line with Bloomberg’s forecasts. It is recalled that in October Turkey had proceeded with a similar reduction, while it had stated at the time that it was thinking of proceeding with another similar step, before ending the easing cycle.

“The Governing Council assessed that the current policy rate is at an adequate level considering the increasing risks related to global demand. The policies to be implemented will be announced in detail in the Monetary and Exchange Policy for 2023, which will be announced in December,” the Central Bank said.

The unorthodox policy pursued by the Central Bank of Turkey, at a time when inflation is officially at 85%, 17 times above the target, emanates directly from Recep Tayyip Erdogan, who often intervenes frequently in the composition of the Bank’s administration.

Erdogan, who publicly argues that lower interest rates have the power to moderate inflation, fired all three of current Governor Sahap Cavcioglu’s predecessors for taking a different line. Last month, Cavcioglu admitted that “we cannot consider ourselves you succeed in reducing inflation”.

Erdogan’s aim is to fuel the economy by promoting cheap loans.

After the last move, the Turkish lira/euro exchange rate drops to 0.052 euro/lira, while the dollar at 0.054 dollar/pound.

The pound has depreciated almost 29% against the dollar this year, the worst performance in emerging markets after the Argentine peso.

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The article is in Greek

Tags: Turkey drop pound Central Bank cut benchmark interest rate

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