The Turkish lira fell to a record low. The decline was reported after the central bank cut its key interest rate on Thursday, triggering a new bout of market turmoil. According to international analysts and a specialized publication, this reflects the long shadow cast by President Recep Tayyip Erdogan on monetary policy.
The cut now risks further shocks to the pound, which has already weakened by more than 16% against the dollar since the governor took office on March 20th. The currency fell to a new record low against the dollar and traded 1.1% lower to 8.7537 at 14:25. local time. This keeps the record low value of 19 stotinki for 1 lira against the Bulgarian currency.
This will also lead to a new boom in trade in our southern neighbor. The first weekends after the biggest wave of guest workers give a convenient window for Bulgarians who prefer the markets and malls in Edirne not only for a new autumn wardrobe, but also for filling the refrigerator.
Meanwhile, the Monetary Policy Committee in Turkey cut its key one-week repo rate by 100 basis points to 18%. The repo rate is the interest rate at which a country’s central bank lends money to commercial banks in the event of a shortage of funds. The repo rate is used by monetary authorities to control inflation.
Turkish inflation rose unexpectedly to 19.25% last month, pushing the country’s real interest rate below zero for the first time since October. But Governor Sahap Kavcioglu has shifted the focus of the bank’s policy to core inflation, which handles volatile prices for key products such as food and energy.
Erdogan has promised cheaper borrowing costs and slower inflation than this month, and failing to do so could lead to the dismissal of the head of the Central Bank. Kavcioglu, who kept the figure unchanged last month, is the fourth central bank governor since 2019, with the president firing his three immediate predecessors.
The central bank said the recent rise in inflation was due to transitional factors and dropped a promise to keep its key interest rate above inflation and maintain a tight monetary policy.
The Bank also stressed the importance of removing the impact of supply shocks on price increases and focusing on “core inflation developments” in a statement accompanying the interest rate decision.
The fall of the pound has kept double-digit inflation in Turkey since the end of 2019. Thus, the pound reached a new record low against the US dollar with a surprising reduction in interest rates.
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