Turkey’s central bank ends series of interest rate cuts

ANKARA, Turkey (AP) — Turkey’s central bank kept its key rate unchanged on Thursday, ending a series of rate cuts that sparked a currency crisis and sent consumer prices soaring.

The bank’s monetary policy committee said it decided to keep its key rate “constant” at 14%, putting on hold a rate cut policy that has cut borrowing costs by 5 percentage points since September despite the surge in inflation. In contrast, many other central banks raised rates to control soaring prices.

Turkish President Recep Tayyip Erdogan insists on lower borrowing costs to boost growth. He has long argued that high interest rates cause inflation, even though economists say raising them is the way to tame soaring prices.

Erdogan has turned to unconventional measures to halt the depreciation of the Turkish lira instead of raising interest rates. The measures include a program that encourages people to keep their savings in lira through guarantees to compensate for losses due to the decline of the Turkish currency. Economists warn that the system could impose an additional burden on the Treasury.

The lira, which lost around 45% of its value against the dollar last year, strengthened slightly against the US currency after Thursday’s interest rate decision.

Inflation in Turkey jumped 36% last month, hitting a 19-year high and leaving many in the country of nearly 84 million people struggling to buy food and other basics.

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Stephen V. Lee