Turkey’s Central Bank Makes Big Rate Cut Amid 80% Inflation

Turkey’s central bank delivered another massive interest rate cut Thursday despite eye-popping inflation above 80%, moving the opposite way from world economies that are raising rates to control prices as the lira sunk to record lows, the Associated Press reported. The Central Bank of the Republic of Turkey lowered the benchmark rate by 1 percentage point, to 12%. The lira was trading around 18.38 against the dollar, weakening further than the previous record low of 18.36 in December. The depreciation of Turkey’s currency is likely to intensify the financial worries of residents who have seen their purchasing power erode during a series of economic shocks in the country. Turkey has followed President Recep Tayyip Erdogan’s unorthodox belief that high interest rates cause high inflation, cutting borrowing costs despite consumer prices rising by 80.21% in August from a year earlier. Traditional economic thinking says raising interest rates fights inflation. Read more.
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