Turkish lira

Turkish Central Bank surprises with more interest rate cuts

The Central Bank of Turkey announced today more interest rate cuts to sustain the growth of the economy and employment.

The Turkish Central Bank surprised markets on Thursday by announcing further interest rate cuts for the second month in a row with the aim of keeping the Turkish economy growing, despite the fact that inflation in Turkey has shot up to 80%.

The Monetary Policy Committee of the Central Bank of the Turkish Republic (TCMB) announced this Thursday a cut of 100 basis points in its one-week reference interest rate, from the previous 13% to 12%, reasoning its decision in a statement saying that it expects a fall in inflation in the coming months (despite the fact that the CPI reached its maximum in 24 years in August), as well as referring to the indicators of a decline in GDP growth in the third quarter.

The arguments put forward by the Central Bank are the same as those given last month when announcing a rate cut of another 100 basis points, from 14% to 13%, after several months keeping them unchanged. “The main indicators for the third quarter point to a loss of momentum in economic activity due to the decrease in foreign demand,” explained the TCMB Committee, insisting on the need to maintain economic growth and employment.

Annual inflation reached 80% in August, although the increase in prices was reduced compared to previous months, which according to the Turkish Central Bank could point to a stabilization of the CPI, whose escalation the entity blames on the rise in prices of energy and food caused by the war in Ukraine. In any case, this new cut in interest has surprised all the economists, who did not expect such a measure from the TCMB.