Turkish President Tayyip Erdogan addresses the media after a cabinet meeting in Ankara, Turkey, December 8, 2021.
Murat Cetinmuhurdar | Reuters
Turkey’s central bank voted on Thursday to cut the country’s key interest rate, the one-week repo rate, to 14% from 15%.
Inflation in the country of 84 million is now at more than 21% and has climbed steadily as President Recep Tayyip Erdogan has refused to raise rates, meaning purchasing power for Turks earning local salaries has plunged. The lira has lost 50% of its value against the dollar year to date.
Investors and economists have been desperately calling for Erdogan to reverse course, but he’s so far stuck to his unusual conviction that higher rates worsen inflation, rather than cooling it, as is the widely accepted economic principle.
The move follows a long series of rate cuts from the central bank, which is seen by markets as not independent from Erdogan, who has called interest rates “the mother of all evil.”
Turkey’s central bank previously announced it was intervening directly in the foreign exchange market on Monday, selling dollars to prop up the lira. But given its already low FX reserves, analysts doubt the strategy will be effective.
This is a breaking news story, please check back later for more.