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The Turkish central bank continues to set interest rates for the eighth month


The Turkish central bank continues to set interest rates for the eighth month

Despite the continued upward trend in inflation and the fall of the lira

Friday – 23rd Al-Hijjah 1443 Hijri – 22nd July 2022 AD Issue no. [

Turkish central bank keeps interest rates low despite lira slump (Reuters)

ANKARA: Abdel Razek said

Turkey’s central bank decided to set its authorized weekly repo (repo) rate at 14 percent, a record for interest rates, for the eighth consecutive month, despite continuing an unprecedented rise in inflation. Turkish lira declines against the dollar.
The bank said in a statement after its monetary policy committee meeting yesterday (Thursday) chaired by Bank President Shihab Koucioglu that geopolitical risks, whose impact is increasing, have weakened global economic activity and increased uncertainty.
He said the recent rise in inflation has been fueled by rising global energy and food prices, supply disruptions and increased demand as a result of heated conflicts.
The statement stressed that until there are strong signs of a permanent easing of inflation, the central bank will firmly use all the tools at its disposal to meet the key price objective, the 5 percent target over the medium term. Stability.
The Turkish central bank has cut interest rates from 19 to 14 percent in the September-December period, and this is a reason for high inflation, contrary to accepted economic theories.
Expectations showed inflation continued to rise in Turkey, reaching 78.62 percent last June, amid fears of a wave of discontent ahead of parliamentary and presidential elections in June next year.
Goldman Sachs expects inflation in Turkey to approach 80 percent before starting to ease at the end of the year. According to a study conducted by the bank, the inflation rate will decrease to 60 percent after that.
The Turkish government, led by President Recep Tayyip Erdogan, is facing severe public unrest against a backdrop of worsening social conditions, as a result of continued declines in the Turkish lira and an unprecedented rise in inflation, which has pushed for continued cuts in Turkish interest rates. The president attributes the inflation to an unprecedented decline in Turks’ purchasing power that has caused a wave of high prices.
In the past two weeks, the Turkish lira has traded in tandem with yesterday, near its lowest exchange rate hit on December 20 when it slipped to 18.4 liras to the dollar. 17.67 lira to the dollar at a meeting of the central bank’s monetary policy committee.
The Turkish lira has lost 44 percent of its value against the dollar in 2021 and about 26 percent of its value this year, becoming one of the worst-performing emerging market currencies. Still under pressure; Unlike the situation there, Turkey’s real income remains negative after moves to tighten monetary policy around the world.
The Turkish central bank left interest rates unchanged in the first seven meetings of its monetary policy committee this year, promising to continue using all available tools firmly within the framework of a lira support strategy, pending strong indicators. It would imply a permanent decrease in inflation and stabilization of general price levels. This will positively impact macroeconomic and financial stability through reduction in risks of government debt premiums, continuation of inverse exchange rate and upward trend of foreign exchange. A permanent reduction in inventory, cost of finance and continuous investment in a healthy and sustainable manner to create a foundation conducive to growth in productivity and employment.


Economy of Turkey

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Nadia Barnett
Nadia Barnett
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