Turkish central bank makes huge rate cut amid 83% inflation

Oct 20, 2022, 4:32 AM | Updated: 3:14 pm

ISTANBUL (AP) — Turkey’s central bank has slashed interest rates for the third month in a row, making its biggest drop this year despite sky-high inflation that is squeezing people’s finances as it follows President Recep Tayyip Erdogan’s unorthodox economic views.

The Central Bank of the Republic of Turkey on Thursday lowered the benchmark rate by a massive 1.5 percentage points, to 10.5%. The bank cut rates by 1 percentage point each in August and September. The bank had kept the rate at 14% for eight months, pausing a previous round of cuts that triggered a currency crisis.

“It is critically important that financial conditions remain supportive to preserve the growth momentum in industrial production and the positive trend in employment” amid uncertainties in global growth and geopolitical risks, the Central Bank said in a statement explaining its latest decision.

The statement signaled that the bank would take a “similar step” in November, which would bring the policy rate to single digits.

Turkey has followed Erdogan’s belief that high borrowing costs cause high inflation, though traditional economic thinking says that raising rates is the antidote to inflation. The country saw inflation hit a staggering 83.45% in official September statistics, making it difficult for people to afford to buy necessities.

Central banks around the world have taken the opposite route of Turkey, rapidly raising interest rates to clamp down on soaring consumer prices. The 19-country area that uses the euro currency saw inflation reach a record 9.9% last month, and the European Central Bank has been enacting big rate hikes to combat it, with another expected next week.

The Turkish lira has lost some 28% of its value against the U.S. dollar since the beginning of the year — on top of taking an even worse battering in 2021. The dollar, on the other hand, has hit a historic high as the U.S. Federal Reserve tightens financial conditions.

As Erdogan gears up for presidential and parliamentary elections next June, he is counting on lower borrowing costs to propel the economy. He has expressed his wish that interest rates go down to single digits and a belief that the lira would appreciate in value.

Erdogan said this month that as long as he’s president, “interest rates will continue to go down every passing day, every passing week, every passing month. No one should give us advice about this subject.”

He said investments and growth can only take place under low interest rates and encouraged businesses to borrow from state banks.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


Lead water pipes pulled from underneath the street are seen in Newark, N.J., Oct. 21, 2021. (AP Pho...

Associated Press

Biden to require cities to replace harmful lead pipes within 10 years

The Biden administration has previously said it wants all of the nation's roughly 9 million lead pipes to be removed, and rapidly.

5 days ago

Facebook's Meta logo sign is seen at the company headquarters in Menlo Park, Calif., on, Oct. 28, 2...

Associated Press

Meta shuts down thousands of fake Facebook accounts that were primed to polarize voters ahead of 2024

Meta said it removed 4789 Facebook accounts in China that targeted the United States before next year’s election.

5 days ago

A demonstrator in Tel Aviv holds a sign calling for a cease-fire in the Hamas-Israel war on Nov. 21...

Associated Press

Hamas releases a third group of hostages as part of truce, and says it will seek to extend the deal

The fragile cease-fire between Israel and Hamas was back on track Sunday as the first American was released under a four-day truce.

10 days ago

Men look over the site of a deadly explosion at Al-Ahli Hospital in Gaza City, Wednesday, Oct. 18, ...

Associated Press

New AP analysis of last month’s deadly Gaza hospital explosion rules out widely cited video

The Associated Press is publishing an updated visual analysis of the deadly Oct. 17 explosion at Gaza's Al-Ahli Hospital.

13 days ago

Peggy Simpson holds a photograph of law enforcement carrying Lee Harvey Oswald's gun through a hall...

Associated Press

JFK assassination remembered 60 years later by surviving witnesses to history, including AP reporter

Peggy Simpson is among the last surviving witnesses who are sharing their stories as the nation marks the 60th anniversary.

13 days ago

Israeli Prime Minister Benjamin Netanyahu, chairs the weekly cabinet meeting in Jerusalem, Sunday, ...

Associated Press

Israeli Cabinet approves cease-fire with Hamas; deal includes release of 50 hostages

Israel’s Cabinet on Wednesday approved a cease-fire deal with the Hamas militant group that would bring a temporary halt to a devastating war.

14 days ago

Sponsored Articles

Follow @KTAR923...

Valley residents should be mindful of plumbing ahead of holidays

With Halloween in the rear-view and more holidays coming up, Day & Night recommends that Valley residents prepare accordingly.


Desert Institute for Spine Care

Desert Institute for Spine Care (DISC) wants to help Valley residents address back, neck issues through awake spine surgery

As the weather begins to change, those with back issues can no longer rely on the dry heat to aid their backs. That's where DISC comes in.



Importance of AC maintenance after Arizona’s excruciating heat wave

An air conditioning unit in Phoenix is vital to living a comfortable life inside, away from triple-digit heat.

Turkish central bank makes huge rate cut amid 83% inflation