The Central Bank of Turkey lowered interest rates this Thursday from 14% to 13%, the first change in 8 months, in a trend contrary to that of other countries and when year-on-year inflation is 79.6%, the maximum in 20 years.
The issuing entity linked its decision to the fact that the increase in inflation, as in past months, is due to “the rise in energy prices due to geopolitical events”, but insists on the need to continue stimulating growth .
“Indicators for the third quarter show some loss of momentum in economic activity. It is important that financial conditions continue to provide support to maintain the growth dynamics in industrial production and the positive trend in employment in a period of uncertainties in global growth and escalating geopolitical risk”, the Bank said in a statement.
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“Therefore, the committee has decided to reduce the interest rate by 100 basis points, considering that this new rate level is appropriate in the current circumstances”he concludes.
It is worth mentioning that inflation in Turkey has been increasing gradually since the beginning of 2020, while the Central Bank was reducing interest rates. Starting last December, it skyrocketed, going from 48% in January to 79.6% in July.
The lowering of rates corresponds to the indications of the Turkish president, Recep Tayyip Erdogan, who has repeatedly demanded a low interest policy to promote spending, production and employment, in what many analysts consider a political strategy before the general and presidential elections in June next year.
The president has changed the governor of the Central Bank four times since July 2019.
