Central Bank of Turkey decides to cut interest rates by 150 basis points, to 9%, despite high inflation

The Central Bank of Turkey cut its basic interest rate for the fourth consecutive time this Thursday (24th), by 150 basis points, to a rate of 9%, according to the entity. The easing of monetary conditions comes despite an increase in inflation in the country of 85.5% in October, in annual terms, the highest increase in 1998.

The interest rate cuts come amid pressure from the President of Turkey, Recep Tayip Erdogan, on the local Central Bank. Erdogan argues that lower interest rates will eventually lead to lower inflation, contrary to the consensus of most economists.

In the communiqué released this morning, the Turkish Central Bank credits high inflation in the country to “late and indirect effects of increases in energy costs caused by geopolitical developments, the effects of price formations distant from economic fundamentals and the strong negative supply shocks caused by increases in global prices for energy, food and agricultural commodities”.

The entity’s Committee hopes that the “disinflationary process” will begin with the “restoration of the global peace environment”. With the current uncertainties and geopolitical risks, it is important that the monetary policy acts in a way that supports the economy, considers the Turkish Central Bank.

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