Turkey cuts interest rate despite soaring inflation

for the second succesive month on Thursday in what economists interpreted as confirmation of its loss of independence from President Recep Tayyip Erdogan.

The bank cut its policy rate to 16 from 18 per cent despite soaring inflation and a depreciating currency.

The lira hit new record lows against the dollar and euro after the announcement.

Erdogan has been pushing the policy-setting bank to cut interests rates in order to boost lending and promote investment and economic growth.

This expansionist policy has helped Turkey’s economy grow throughout the coronavirus pandemic and perform far better than its emerging market peers.

But the drawbacks have also been dire. The lira has lost one fifth of its value against the dollar and the annual inflation rate has reached nearly 20 percent -- quadruple the government target.

Turks are converting their liras into foreign currencies and gold to try and preserve their dwindling savings as a result. Thursday’s cut reaffirms “that monetary policy is firmly under Erdogan’s influence,” Eurasia Group said in a note.