The decision is probably made in accordance with the Turkish government’s economic policy, which prioritizes economic growth at the expense of inflation, in order to weather the effects of the disastrous earthquakes.
On Thursday, the Turkish Central Bank announced a new reduction in interest rates as the Turkish government tries to mitigate the economic effects of the twin earthquakes, which claimed more than 43,550 lives.
The necessity for economic growth and the effect of the earthquakes on the economy were cited by the bank in its announcement that the country’s policy rate had been decreased by 0.5 percentage points, from 9% to 8.5%.
The Turkish Lira is currently trading at 18.8752 per US dollar, a small decline from yesterday’s close of 18.8802.
Under political pressure from Turkey’s President Recep Tayyip Erdogan, the country’s Central Bank embarked on a series of unorthodox rate cuts over the past year. It brought its policy rate to single digits from 14% to 9%, starkly contrasting with its emerging economy peers that have been increasing their policy rates to weather the fallout from the Ukraine war, which has further pushed up the prices of energy and other major commodities.
Erdogan, who holds the unconventional view that high interest rates cause inflation, prioritizes economic growth at the expense of addressing an inflation storm that has been further fueled by rate cuts. Turkey’s year-on-year inflation reached a 24-year high of 85.5% last year, before dropping to 64.27% in January owing largely to a favorable base effect from previous year.
Read more: https://www.al-monitor.com/originals/2023/02/turkeys-central-bank-slashes-interest-rates-after-devastating-earthquakes#ixzz7uAKqMKrl
