Turkey slashes interest rates to kickstart economy
Turkey's central bank has cuts interest rates more than expected after President Recep Tayyip Erdogan promised that the measure would reduce inflation and ease Turks' pain.
ISTANBUL — Turkey slashed its benchmark interest rate more than expected on Thursday, delivering on an assurance from President Recep Tayyip Erdogan over the weekend that loans would become cheaper to boost economic growth.
High unemployment and steep price rises for food and other basic goods in the past year have dented support for Erdogan’s Justice and Development Party (AKP), which suffered a string of losses in nationwide municipal elections earlier this year. The president has sought to quickly resuscitate the economy through a combination of government spending and easy borrowing for consumers.
The central bank shaved 325 basis points off the policy rate, bringing it to 16.5%. The size of the latest interest rate cut exceeded the consensus of 275 basis points in a Bloomberg poll of economists. Yet it was less than the 500 basis points a pro-government newspaper claimed the bank would cut, and relieved investors likely helped buoy the lira by 1% against the dollar.
Erdogan has badgered the central bank, which is supposed to be independent of political influence, to keep interest low to encourage faster growth, especially as pre-election government stimulus dries up after the economy skidded into a brief recession this year.
