Turkey central bank cuts key rate

ANKARA:Turkey’s central bank cut its main interest rate on Thursday after months of pressure from President Recep Tayyip Erdogan for it to lower rates.

The Turkish lira lost over 1.4 per cent in value against the US dollar after the bank announced it was cutting the one-week repo rate to 18 per cent from 19 per cent.

The move comes despite high inflation, reaching 19.25 per cent in August, and appears to show just how much pressure the bank is under Erdogan’s rule.

The lira has lost around 15 per cent of its value against the greenback since the start of 2021.

The Bloomberg consensus had been for the rate to be kept stable although one economist predicted a cut of 0.5 per cent.

Erdogan has previously described rates as the “mother and father of all evil” and last month said they needed to fall for lower inflation to follow, going against economic orthodoxy.

Earlier this month, central bank governor Sahap Kavcioglu told investors that consumer prices were expected to drop in the months ahead and the bank would now look at “core” inflation — which is below 17 per cent after excluding volatile items such as food and fuel — for future decisions.