Turkey’s central bank has cut interest rates on its benchmark borrowing rate, the one-week repo rate, from 24% to 19.75%. It is the largest cut in interest rates in Turkey since 2002 and the first cut since 2016.
The cut comes after the Turkish president Recep Tayyip Erdogan sacked the former governor of Turkish central bank earlier in July. The monetary policy makers, including the new appointed governor of the central bank, Murat Uysal, have lowered the rate by 425 basis points, more than most analysts had expected.
The central bank cited improving domestic inflation for its decision to cut the cost of borrowing. Inflation surged last year to more than 25% in the months following the sharp depreciation of Turkish lira but had since fallen to 15.7% in June.
The lira lost some ground immediately after the announcement on the lower rate was made but then rallied in the subsequent trading.
Despite the increasing tensions with the US over the delivery of Russian defence system, lira remains up 1.4% m-o-m against the dollar.
