The Turkish Central Bank cuts interest rates to 15%, and this is what Erdogan said

The Turkish Central Bank decided today, Thursday, to reduce the main interest rate to 15%.

The Monetary Policy Committee of the Bank decided to reduce the interest rate on repurchases (repo) for a week by one hundred basis points to 15%, which was expected.

“The committee has evaluated analyzes of demand factors that could be affected by monetary policy, core inflation developments, and the effects of shocks on supplies, and decided to cut the interest rate by 100 basis points to 15%,” the central bank said.

The exchange rate of the lira fell to 10.92 liras per dollar, and compensated part of the losses recorded earlier today, Thursday, according to the German news agency.

The committee cut interest rates last month by 200 basis points to 16%, after cutting by 100 basis points last September.

Erdogan’s war on interest

The new cut comes a day after Turkish President Recep Tayyip Erdogan said he would continue his fight against interest rates “to the end”.

He said he would take the burden of interest rates off the people, urging companies to invest, hire and increase exports.

“We will lift this interest rate whip off the backs of people. Certainly we cannot allow our people to be crushed by interest rates,” the Turkish president told lawmakers from his ruling party.

“I cannot stand … and I will not stand in this path with those who defend interest rates,” he added.

The Turkish currency is 30% lower than its level at the beginning of the year, and recorded losses of 64% over 4 years, which reduces the purchasing power of the Turks amid an inflation rate close to 20%.

And the Turkish Statistics Authority announced that the inflation rate rose last October by 19.89% on an annual basis.

The Central Bank of Turkey recently revised its inflation forecasts for the end of this year, saying that the annual inflation rate is expected to reach 18.4% by the end of 2021, compared to 14.1% in previous forecasts.

The decline of the US dollar

The lira’s recent decline was also exacerbated by the rise of the dollar after higher-than-expected inflation data in the United States.

But the US currency retreated from its highest level in 16 months on Thursday, losing some of its gains against the euro and other currencies, as investors assessed the latest rise in the dollar and whether it was beginning to dissipate.

The dollar index – which measures the performance of the US currency against a basket of 6 competing currencies – recorded its highest level since mid-July 2020 yesterday, Wednesday, at 96.226. But it last traded at 95,694, down 0.1% on the day.

The euro, which was hovering near a 16-month low, rose 0.1% to $1.1334. Sterling last traded at $1,3503, up slightly on the day.

The dollar rose in the past weeks as traders bet on tighter US monetary policy.

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