Türkiye’s Central Bank shocks with another rate cut

Turkish lira fell to a record low of 18.42 per dollar
Türkiye’s Central Bank shocks with another rate cut
Türkiye central bank's entrance

Türkiye’s central bank announced a surprise interest rate cut of 100 basis points to 12 percent on Thursday, sending the lira to its lowest level ever, despite inflation exceeding 80 percent and central banks around the world racing to tighten monetary policy.

Unconventional interest rate cuts in the last year, combined with soaring commodity prices, have driven inflation to a 24-year high and triggered a price crisis for the Turks.

The Central Bank justified this action by citing continued signs of an economic slowdown and stating that it expected inflation to begin to fall.

“The third-quarter leading indicators continue to point to a loss of momentum in economic activity due to lower external demand,” the bank’s policy committee said.

The lira fell to a record low of 18.42 per dollar, below the level reached during the global currency crisis in December, before recovering to 18.38 later in the day.

Moreover, 11 of 14 economists polled lately predicted that interest rates would remain unchanged. One predicted a 50 basis point cut to 12.50 percent, while two predicted a 100 basis point cut to 12 percent.

In September, Türkiye raised electricity and natural gas prices for households by about 20 percent and for the industrial sector by about 50 percent, adding to the pressures on inflation.

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