Continuing with its unconventional strategy of cutting interest rates in an effort to fight inflation, the Turkey's central bank cut rates by 150 basis points on Thursday to 10.5% and signaled one more cut before it ends the loosening cycle.
A survey of economists by Bloomberg expected a 100-bp reduction. The Central Bank of the Republic of Turkey said it expects a slowdown in economic growth in the second half of the year due to weakening foreign demand. It blamed geopolitical events for the country's high inflation, although inflation was high in Turkey before the Russia-Ukraine war.
"It is critically important that financial conditions remain supportive to preserve the growth momentum in industrial production and the positive trend in employment in a period of increasing uncertainties regarding global growth as well as further escalation of geopolitical risks," the CBRT said in its statement.
The central bank's policymaking committee said it evaluated taking a similar rate cut at the next meeting before ending the rate cut cycle.
Earlier this month, Turkey's inflation rate hit an 83% Y/Y rate . The CBRT aims for medium-term inflation of 5%.
The Turkish lira is up almost 0.1% against the U.S. dollar in Thursday trading. However, it has lost 28% against the greenback YTD and is down 49% in the past year. iShares MSCI Turkey ETF ( NASDAQ: TUR ) is little changed in U.S. premarket trading.
In August, the Turkish lira plummeted after a surprise rate cut.
For further details see:
Turkey's central bank cuts key rate more than expected, signals one more cut