%20(3).png){kind=small}
![TFD [LOGO] (10).png](https://static.wixstatic.com/media/bea252_c1775b2fb69c4411abe5f0d27e15b130~mv2.png/v1/crop/x_150,y_143,w_1221,h_1193/fill/w_179,h_176,al_c,q_85,usm_0.66_1.00_0.01,enc_avif,quality_auto/TFD%20%5BLOGO%5D%20(10).png)
Turkey Shocks World With Rate Cut As Inflation Soars To 80%
- By The Financial District
- Aug 20, 2022
- 2 min read
Turkey’s central bank shocked markets Thursday with a cut to its benchmark policy rate, despite inflation in the country sitting near 80%.
Photo Insert: The country’s main policy rate, which had been at 14% for the last seven months, was cut to 13% in a complete mismatch to what other central banks are doing around the world.
The lira, Turkey’s currency, slid 0.9% against the dollar, trading at more than 18.1 to the greenback after the news — near a record low, Natasha Turak and Matt Clinch reported for CNBC.
The country’s main policy rate, which had been at 14% for the last seven months, was cut to 13% in a complete mismatch to what other central banks are doing around the world.
“Another idiotic move,” commented Timothy Ash, a senior emerging markets strategist at BlueBay Asset Management. “Insane with inflation at 80% and still rising, the Central Bank of the Republic of Turkey (CBRT) cuts rates, against expectations by 100bps to just 13%,” he wrote on Twitter.
“Ridiculous move. Obviously, they have got cash in their pockets from Russia and the Gulf and think they can cut rates + hold the Lira.”
Analysts expected no rate change, so the move lower by the Turkish central bank has taken markets by surprise. The main BIST index snapped session gains to trade lower by 0.8% after the decision, though later turned positive, up 0.2% within the following hour, according to Reuters data.
The central bank’s statement Thursday said that the committee expects the “disinflation process to start” and that there are signals of a “loss of momentum in economic activity.”
Turkey’s inflation for the month of July rose by an eye-watering 79.6% year over year, its highest in 24 years, as the country grapples with soaring food and energy costs and President Recep Tayyip Erdogan’s long-running unorthodox strategy on monetary policy. This time five years ago the lira traded at 3.5 to the dollar; now it’s more than 18 to 1.
