Turkey Central Bank Slashes Policy Rate; Ends Easing Cycle

turkey may31 24nov22 lt

In stark contrast to the monetary policy tightening stance of global central banks, Turkey decided to slash its policy rate by 150 basis points and to end the current rate cut cycle that began in August.

The Monetary Policy Committee of the Central Bank of the Republic of Turkey, headed by Sahap Kavcioglu, cut the policy rate to 9.00 percent from 10.50 percent.

The bank has lowered the policy rate over the last four consecutive meetings by a cumulative 500 basis points.

"Considering the increasing risks regarding global demand, the Committee evaluated that the current policy rate is adequate and decided to end the rate cut cycle that started in August," the bank said.

There is clearly a risk that President Tayyip Erdogan forces the central bank to cut interest rates further in the coming months, particularly as the 2023 elections come into view, Capital Economics' economist Liam Peach said.

Even if rates remain on hold, the central bank looks set to continue with its deeply negative real policy stance, which it has been able to operate partly because there has not been a sharp fall in the lira, the economist added.

In October, consumer price inflation accelerated to a 24-year high of 85.51 percent from 83.45 percent in September.

The committee said disinflation process will begin, underpinned by measures taken for strengthening sustainable price and financial stability along with the resolution of the ongoing regional conflict.

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