18.Aug .2022 16:00

Turkish central bank surprises with 100-basis-point rate cut

Turkish central bank surprises with 100-basis-point rate cut
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Türkiye's central bank on Thursday surprised the markets as it slashed its benchmark policy rate by 100 basis points, against the background of soaring inflation that runs at a 24-year high.

The Central Bank of the Republic of Türkiye (CBRT) cited the "weakening effects of geopolitical risks" as it lowered its one-week repo rate to 13% from 14%, the level it was kept at for the last seven months.

Most economists expected the key policy rate to remain steady through year-end. The rate was kept steady since January when the CBRT paused an easing cycle after its cuts totaling 500 basis points since September last year.

Türkiye’s annual inflation rose at a slower-than-expected pace in July but still reached a fresh 24-year high of nearly 80%, stoked in part by surging energy prices due to Russia’s invasion of Ukraine.

The CBRT raised its year-end inflation forecast to 60.4% last month, and saw it peaking near 90% in the autumn.

President Recep Tayyip Erdoğan in June vowed that his government would continue lowering interest rates rather than increasing them.

Erdoğan is known for his opposition to higher borrowing costs, which he says only makes “the rich richer and the poor poorer.”

The government has been affirming its commitment to boosting production, exports and employment with a low-rates policy, and has promised a current account surplus that is said to eventually steady the Turkish lira and cool inflation, Daily Sabah reports.