Turkey cut the rate after the inflation of around 80%, leaving the market surprised

Turkey cut the rate after the inflation of around 80

August 19, 2022: -On Thursday, Turkey’s central bank surprised markets with a cut to its benchmark policy rate, despite inflation in the country sitting at about 80%.

The country’s currency, the Lira, skated 0.9% against the dollar, trading at more than 18.1 to the greenback following the news near a record low.

The country’s immediate 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 worldwide.

“Another idiotic move,” commented Timothy Ash, a senior emerging markets strategist at BlueBay Asset Management.

“Insane with inflation at 80% and still growing, the CBRT cuts rates, against expectations by 100bps to just 13%,” he wrote on Twitter, referring to Turkey’s central bank by its acronym.

“Ridiculous move. They have cash in their pockets from Russia and the Gulf and think they can cut rates + hold the Lira.”

Analysts expected no rate change; the move lower by the central bank has surprised markets. According to Reuters data, the main BIST index snapped session gains to trade lower by 0.8% after the decision.

Turkey’s inflation for July increased by an eye-watering 79.6% year on year, its highest in 24 years, as the country wrestles with soaring food and energy prices and President Recep Tayyip Erdogan’s long-running unorthodox strategy on monetary policy.

Overflowing consumer prices have hit the population of 84 million hard. Few hope for improvement anytime soon, gratitude to the Russia-Ukraine war, high energy, food prices, and a sharply weakened lira.

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Turkey cut the rate after the inflation of around 80%
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Turkey cut the rate after the inflation of around 80%
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The central bank of Turkey surprised markets with a cut to its benchmark policy rate, despite inflation in the country sitting at about 80%.
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The Women Leaders
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