Turkish central bank cuts rates for 3rd month despite weak lira

Turkish central bank cuts rates for 3rd month despite weak lira

ISTANBUL: Turkey’s central bank on Thursday cut its policy rate for the third consecutive month despite plunging lira and an annual inflation rate that has soared over 83 percent. The central bank said it was cutting its one-week repo rate to 10.5 percent from 12 percent, with a surge in consumer prices it said was “driven by the lagged and indirect effects of rising energy costs” caused by Russia’s war on Ukraine.

The decision comes right after President Recep Tayyip Erdogan said the central bank would keep cutting rates every month for “as long as I am in power”. Erdogan wants interest rates to lower down to single digits by the end of the year as he prioritizes economic growth eight months before a general election-which could promise to be the closest since he came to power nearly two decades ago.

Turkish decision makers have insisted on following this unconventional economic model at the expense of an astronomical inflation. Erdogan, a vocal opponent of higher borrowing costs, has called high interest rates his “biggest enemy”. Earlier this month he vowed that while he remained in power, “the interest will continue to come down with each passing day, each passing week, each passing month.”

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