Turkish central bank governor Shihab Kavcioglu said on Monday that it was a mistake to link the recent depreciation of the lira to the bank’s cut of its benchmark interest rate by 100 basis points to 18% in September.
Responding to questions from lawmakers at the Turkish Parliament’s Planning and Budget Commission, Kavcioglu said the rate cut was not a surprise and that the central bank has not neglected its duties.
The lira fell more than 0.6% today to record a new all-time low of 9.02 against the green currency, bringing its year-to-date losses to 17.5%.
The Turkish lira fell more than 8.9 against the dollar last week, it hit an all-time low due to fears of an unexpected rate cut.
The dollar rose today, supported by fears of global inflation and the expected tightening by the US central bank.
Data showed that Turkey’s inflation rose slightly less than expected to 19.58% yoy in September, the highest level since March 2019, taking more losses for real yields after the central bank cut the interest rate at 18%.
Analysts saw the easing of monetary policy as new evidence of the political interference of President Recep Tayyip Erdogan, a staunch opponent of high interest rates who called for monetary stimulus despite a sharp rise in prices.
Citing sources, Reuters reported Friday that Erdogan was furious that the easing of monetary policy had lasted so long and that he was losing confidence. in Kavcioglu less than seven months after the ouster of his predecessor.
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