Since September alone, the Central Bank of Turkey has cut its interest rate 400 basis points, increasing pressure on the Turkish lira.
The Central Bank of the Republic of Turkey (TCMB) announced this Thursday a new cut in its one-week benchmark interest rate by 100 basis points, from 16% to 15%, in line with market expectations: something that caused a new fall in the Turkish lira – which fell to 2.46% against the dollar this Thursday – deepening the depreciation of Turkey’s national currency, which has lost more than 30% of its value this year.
During the 11th meeting of the Monetary Policy Committee (PPK) held so far this year, the Central Bank explained that the latest increases in inflation had been driven by factors related to the supply chain, causing the increase in prices in the food and imports, especially energy.
When making its decision, the Committee “evaluated the analyses to decompose the impact of the demand factors on which monetary policy may have an effect, the evolution of underlying inflation, and the impacts on supply”; recognizing that these factors limit the entity’s room for maneuver, the PPK added in its statement that it will reassess the situation in December, and did not rule out making further cuts.
This new interest rate cut, in line with the expectations of economists and market analysts (who had generally projected that the reference interest rate in Turkey would end in 2021 at 15%) means that, only since last September, the Central Bank of Turkey has cut its benchmark interest rate by 400 basis points, while year-on-year inflation reached 19.89% in October.
Did you like it?
When Monica finished her business degree, she had the idea to celebrate it travelling: that’s how she ended up visiting Turkey, and she liked it so much… that she decided to stay and live there! And she is still there, reporting from the city of Bursa on the latest news about the interesting Turkish economy.