On the 12th (local time) in Istanbul, Turkey, union protesters marched through the streets denouncing the government's economic policies. As the Turkish lira's value fell to an all-time low, President Recep Tayyip Erdogan urged the public on the 8th to trust and follow the government's economic policies. [Image source=Yonhap News]
The Central Bank of Turkey has once again cut its benchmark interest rate.
On the 16th (local time), the Central Bank of Turkey held a monetary policy committee meeting and lowered the benchmark interest rate by 1 percentage point to 14%. The benchmark rate, which was 19% in September, has fallen by 5 percentage points over four months.
The central bank stated, "National income data and leading indicators show that domestic economic activity remains strong, supported by external demand," and added, "The strengthening export trend will result in a current account surplus in 2022."
Following the announcement of the rate cut, the Turkish Lira's value has hit record lows. The Lira surpassed 15 per US dollar in the morning, and immediately after the rate cut announcement, it fell to as low as 15.7 per US dollar.
Considering that at the beginning of this year it traded in the mid-7 Lira range per US dollar, the Lira's value has dropped to less than half in one year. Typically, when a central bank cuts its benchmark interest rate, the value of the domestic currency falls against foreign currencies, the money supply increases, and inflation rises.
According to TurkStat, Turkey's official statistical agency, the consumer price inflation rate in November was 21.31%. Despite the expected decline in the Lira's value and rising inflation, the central bank is cutting rates due to President Recep Tayyip Erdo?an's demands for rate cuts.
President Erdo?an has pressured the central bank to lower rates, stating, "If borrowing costs decrease, manufacturing will be revitalized and consumer prices will fall."
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