Turkey cuts the interest rate by 50 basis points

Turkey’s central bank on Thursday cut its interest rate by 50 basis points from 9% to 8.5% as the country continues to stumble in the aftermath of the devastating earthquake that affected millions of lives.

The move, which marks a resumption of a series of interest rate cuts in 2022 despite rising inflation, was in line with Reuters forecasts and is the lowest one-week repo rate in more than two years, according to Refinitiv data.

“It has become important to keep financial conditions supportive to maintain the growth momentum in industrial production and the positive trend in employment after the earthquake,” the central bank said. he said in a press releaseHe added that the impact of the quake is still being widely assessed.

Two back-to-back earthquakes rocked Turkey and Syria earlier this month, the strongest in the region in nearly a century, killing more than 46,000 people so far.

“While the earthquake is expected to affect economic activity in the near term, it is not expected to have a lasting impact on the performance of the Turkish economy in the medium term,” the statement said.

The country’s latest annual inflation rate in January was 57.68%.

With reconstruction costs estimated to run into billions of dollars, the disaster has further embroiled Turkey in a downward spiral.

Turkish monetary policy is based on the pursuit of growth and export competition rather than calming inflation. Turkish President Recep Tayyip Erdogan takes the unorthodox view that raising interest rates increases inflation, rather than taming it.

This policy significantly weakened the Turkish currency last year and pushed the country’s inflation rates to record levels.

The Turkish lira stabilized at 18.87 against the dollar, after the Central Bank’s decision.