ANKARA, Turkey (AP) — Turkey’s central bank delivered another major rate cut on Thursday as inflation tops 85% and other countries move in the opposite direction to ease the pain of rising prices. Hey.
The central bank said its monetary policy committee decided to cut its key rate by 1.5 percentage points to 9%, following a series of similar jumbo cuts.
The move is in line with President Recep Tayyip Erdogan’s unorthodox economic views that higher borrowing costs lead to higher inflation, even though conventional economic thinking says raising interest rates helps reduce inflation.
Erdogan had called for single-digit interest rates by the end of the year. He counts on lower borrowing costs to support the economy as Turkey prepares for presidential and parliamentary elections in June.
The bank also cut borrowing costs by 1.5 basis points last month and by one basis point each in August and September. However, the Monetary Policy Committee announced that the easing cycle would now come to a halt.
“Given rising risks related to global demand, the Committee has deemed current policy rates to be adequate and has decided to end the cycle of interest rate cuts that began in August,” it said in a statement.
According to official figures, inflation in October was 85.51%, making even basic necessities unaffordable for many. However, independent researchers estimate that the actual price increase is much higher than the official figures.
The European Central Bank, the US Federal Reserve and other central banks around the world have moved in the opposite direction to Turkey’s, sharply raising interest rates to rein in rising consumer prices. Sweden raised its policy rate by three-quarters of a percentage point on Thursday.
Their inflation rate is well below that of Turkey, which last month stood at 10.6% of the 19 countries using the euro, Sweden at 9.3% and the US at 7.7%.
The Turkish lira has lost nearly 28% of its value against the US dollar since the start of the year – and 2021 looks even worse.
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