© Reuters
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Turkey’s central bank cut its key interest rate by 16% today, bringing the Turkish lira to a record low of 9.47 per dollar, the DPA reported, citing BTA.
The bank said it was cutting its one-week repo rate from 18 percent to 16 percent, a drastic decision, despite analysts’ warnings that further interest rate cuts could weaken the pound and boost inflation. The pound reached a rate above 11 against the euro after the decision.
Another drop in the pound to values it had not reached, dismissals on the board of the central bank followed, with which President Recep Tayyip Erdogan directly intervened in the decision-making process for the country’s monetary policy.
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The Turkish currency reported a steady decline after the interest rate fell by 100 basis points last month – the first decline in more than a year. Earlier this month, the World Bank warned of financial instability in Turkish markets if interest rates continue to fall. “Maintaining a loose monetary policy could further weaken investor confidence, increase market volatility and threaten macro-financial stability in the future,” the World Bank said.
The Turkish lira has lost 60 percent of its value since 2018. The drastic cut in interest rates comes after President Recep Tayyip Erdogan replaced two key central bank officials last week.
Confidence in the bank has been significantly affected by Erdogan’s appointments, the agency noted. The president replaced three central bank governors within two years, sparking a collapse in investor confidence.
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