Turkey’s central bank on Thursday cut interest rates by 150 basis points to 9% and decided to end its cycle of monetary policy easing, citing increased inflation risks.
The central bank has been under consistent pressure from President Recep Tayyip Erdogan to continue cutting rates despite soaring inflation, which hit 85.5% year-on-year in October as food and energy prices continued to soar.
“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 central bank said in a statement.
Erdogan has continued to insist that raising interest rates, in line with central banks around the world, would harm the Turkish economy, an insistence economists suggest has caused a significant devaluation of the lira currency and driven inflation higher.
“While the negative consequences of supply constraints in some sectors, particularly basic food, have been alleviated by the strategic solutions facilitated by Türkiye, the upward trend in producer and consumer prices continues on an international scale,” the central bank said.
“The effects of high global inflation on inflation expectations and international financial markets are closely monitored. Moreover, central banks in advanced economies emphasize that the rise in inflation may last longer than previously anticipated due to high level of energy prices, imbalances between supply and demand, and rigidities in labor markets,” it added.