Turkey’s central bank keeps key interest rate stable amid high inflation
Turkey’s central bank on Thursday kept its main interest rate unchanged for a fourth month even as soaring inflation hit a 20-year high and eroded people’s purchasing power.
In a statement following a monetary policy committee meeting, the bank said it was keeping its key rate constant at 14%.
The move was in line with President Recep Tayyip Erdogan’s opposition to high borrowing costs in an effort to boost growth, investment and exports. The Turkish leader insists that rising interest rates cause inflation, a position that contradicts established economic thinking.
Turkey’s central bank has cut rates by 5 percentage points since September despite high inflation, then suspended them since January. The series of rate cuts last year triggered a currency crisis and rising consumer prices that were compounded by Russia’s invasion of Ukraine and soaring energy prices.
Annual inflation hit 61.14% in March, adding pressure on households that were already struggling to buy basic commodities. The Turkish lira lost 44% of its value against the US dollar last year.
To soften the blow to households, the government introduced tax cuts on basic necessities and adjusted electricity prices.
By comparison, the United States, the United Kingdom and the 19 countries that use the euro have experienced high levels of inflation for decades, respectively 8.5%, 7% and 7.5%, but are far from reaching the breathtaking rate of Turkey. The central banks of the United States and the United Kingdom raised interest rates to fight inflation.
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