The Turkish central bank has lowered the key interest rate despite the high inflation rate.
Economists consider this to be the completely wrong path.
Ankara - Despite a very high inflation rate, the Turkish central bank surprisingly lowered the key interest rate significantly on Thursday.
She is apparently giving pressure to President Recep Tayyip Erdogan.
Contrary to popular belief, he believes that the country's economy, which is suffering from high inflation, can be stimulated with lower interest rates.
As the central bank announced in Ankara on Thursday, the key interest rate will be reduced by 2.0 percentage points to 16.0 percent.
Economists had only expected a decrease to 17 percent on average.
Turkey: Lira at record low
The Turkish lira came under considerable pressure and fell to record lows against the US dollar and the euro.
The Turkish lira has fallen by over 20 percent against the dollar this year.
The euro rose to more than 11 lira for the first time.
The prices of Turkish government bonds came under severe pressure.
The Turkish stock markets turned into the red.
After the interest rate cut, the key interest rate is even more significantly below the high inflation rate.
This was 19.58 percent in September.
This means that the real interest rate, i.e. the key rate minus inflation, is negative.
Economists agree that the current situation, on the other hand, speaks in favor of interest rate hikes.
Investing in Turkish assets is now becoming even less attractive.
This is also putting pressure on the Turkish currency.
The weak lira is also fueling inflation as imported goods become more expensive.
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The current central bank chief Sahap Kavcioglu has only been in office since March after his predecessor Naci Agbal was dismissed for raising interest rates.
Kavcioglu is now the fourth central bank governor since 2019. All of his predecessors were ultimately out of favor because they did not support Erdogan's preferred course of loose monetary policy.
(dpa)
