Turkish central bank cuts rates again despite surging inflation
The Turkish central bank cut interest rates again on Thursday despite surging inflation.
The Central Bank of the Republic of Turkey cut its benchmark rate to 9% from 10.5%, pointing to increased inflation risks, but also said this would mark the end of the easing cycle.
The move - which was in line with expectations - comes amid calls from president Tayyip Erdogan to get interest rates down to single digits by the end of the year. Turkey’s annual inflation rose to a new 24-year high of 85.5% in October.
The CBRT said: "Considering the increasing risks regarding global demand, the Committee evaluated that the current policy rate is adequate and decided to end the rate cut cycle that started in August."
TD Securities said: "This is in line with the view we have held for some time now. The rest of the statement very much resembles the prior one from the 20 October meeting.
"The overall view is still the same: the economy is weakening while high inflation remains the result of ‘lagged and indirect effects’ of other (subsiding) factors. Therefore, the disinflation process should start soon, based on the CBRT's assessment.
"However, while base effects on inflation will soon turn more favourable for Turkey, we think that inflationary pressure will not abate as quickly as the MPC is (and has been for most of 2022) anticipating."
TD went on to say that the decision to cut rates remains a politically-motivated one. "It answers the call from President Erdogan to bring the policy interest rate down to single digits (however unscientific this request may be) in order to support growth (at the detriment of price stability) ahead of next year's key general elections."