Turkey’s central bank cuts interest rate to 13%

Contrary to expectations, the Turkish Central Bank decided on Thursday, August 18, to cut the interest rate on the lira during the week (Repo) to 13% from 14%, even though the inflation rate in the country is close to 80%.

Over the past seven months, the Turkish Central Bank has pursued a policy of maintaining the interest rate at 14%. The decision to reduce the rate to 13% was contrary to what other central banks are doing worldwide.

Following the Turkish interest rate cut, the US dollar rose against the Turkish lira by 1% to 18.1 per dollar.

Turkey’s inflation rate for July rose 79.6% year-on-year, its highest level in 24 years, as the country struggles with rising food and energy prices.

The Turkish Central Bank raised its forecast for inflation in 2022 to 60.4%, up from 42.8% expected last April.

After several attempts for a month, the Turkish lira tried to consolidate below the levels of the 18 lira dollars, which most market analysts see as important support levels without breaking the lira contract.

During these moments of trading today, Thursday, the Turkish lira fell within the range of 1%, down to levels near 18.1488/dollar, compared to levels of 17.9382 liras dollars before the central decision.