ISTANBUL (Reuters) – Turkey’s central bank on Thursday cut its key rate by 150 basis points to 9% as expected and announced the end of its monetary easing cycle.
On the foreign exchange market, the Turkish lira fell to 18.66 per dollar and was trading at 18.6295 around 12:25 GMT.
With the cut announced on Thursday, the Turkish central bank has cut rates by a total of 500 basis points in four months.
The Turkish monetary institution believes that this policy, against the current of the main banks in the world, was necessary in view of the signs of economic slowdown in the country.
“It is extremely important that financial conditions remain favorable (…) in a period of heightened uncertainty over global growth and increased geopolitical risks,” writes the central bank.
“Given the growing risks to global demand, the Committee assessed the current policy rate as adequate and decided to end the rate cut cycle that began in August,” the bank added.
Inflation in Turkey has surged since the fall of 2021, fueled by central bank monetary easing, a policy wanted by Turkish President Tayyip Erdogan, who presents himself as an “enemy” of interest rates .
Last month, he assured that the central bank would continue to cut rates every month “as long as (he) was in power”.
Six of the seven economists polled by Reuters nevertheless expect a phase of monetary tightening which will bring the key rate to a range of between 16% and 35% next year.
According to analysts, the announced tightening will however depend on the outcome of the presidential election scheduled for May or June 2023, a victory for the opposition candidate being likely to return Turkey to a more orthodox economic policy.
Turkey’s central bank forecasts an ebb in inflation, currently above 85%, to 65.2% by the end of the year, against a median estimate of 70.25% in the latest Reuters survey.
(Report Ali Kucukgocmen;; French version Claude Chendjou, edited by Blandine Hénault)