Key Takeaways:
- Turkey's Central Bank has lowered the benchmark interest rate for the third consecutive month
- The apex bank cut the interest rate by 150 basis points, more than what experts expected
- Under President Erdogan's policies, the Turkish economy has been reduced to shambles
YEREVAN (CoinChapter.com) —Turkey’s Central Bank has once again slashed interest rates in the country despite the inflation rate hitting a staggering 83.45% in official September statistics. The latest 1.5% cut, which lowered the benchmark rate from 12% to 10.5%, is the largest so far. It is also the third consecutive cut in a row and has surpassed the experts’ expectation of a 100 basis points cut.
“It is critically important that financial conditions remain supportive to preserve the growth momentum…in a period of increasing uncertainties regarding global growth as well as a further escalation of geopolitical risks,”
the Central Bank’s Monetary Policy Committee said in a statement.
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President Erdogan leads Turkey to an economic disaster
The latest interest rate cut in Turkey is a continuation of Turkish President Recep Tayyip Erdoğan’s unconventional economic policies.
As CoinChapter had reported earlier this year, Erdogan has resorted to quoting the Islamic scriptures claim that high-interest rates are evil and un-Islamic.
“As long as I am in this position, I will continue to fight against [high] interest rates…I cannot stand by those who defend interest,”
the Turkish President told party workers last November.
Several economists have slammed Erdogan’s policy of pushing for interest cuts despite rising inflation. Inflation in Turkey in December of 2021 was at 36.1. It has since risen month on month to record highs.
Thanks to Erdogan’s policies of reducing interest rates, the nation’s currency has taken a drubbing. Year to date, the Turkish lira has lost nearly 30% of its value against the U.S. Dollar after suffering heavy blows in 2021. In contrast, USD has hit a historic high thanks to the U.S. Federal Reserve’s steps to tighten financial conditions.
Turkish Central Bank part of Erdogan’s election gamble?
Critics point out that President Erdogan could lose the upcoming general elections in June 2023. After inflation in the country hit a 24-year high, experts argue that his Justice and Development Party (AKP) will look to leverage low-interest rates when the country goes to the polls.
“Erdogan, who has ruled Turkey for nearly two decades as both prime minister and president, is facing a difficult reelection battle in next year’s election due in part to the economy, which suffers from one of the world’s highest rates of inflation,” one Twitter user pointed out.
Whether or not the latest rate cuts by Turkey’s Central Bank will help Erdogan, however, remains to be seen. Meanwhile, he has undoubtedly led his country to an economic disaster that only seems to get worse.
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