Turkey’s Central Bank on Wednesday lowered its benchmark interest rate by a percentage point to 8.75 per cent as it seeks to alleviate the impact of the coronavirus pandemic.
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The bank said it cut its one-week repo rate from 9.75 per cent in March to 8.75 per cent, even as the lira had been weakening against the dollar.
In a statement after a meeting of its Monetary Policy Committee, the bank noted sluggish economic activity since mid-March because of the effects of the pandemic on trade, tourism and domestic demand.
“In spite recent depreciation in the Turkish lira due to global developments, inflation projections will be lower in the coming months because of a continued sharp decline in international commodity prices, especially crude oil and metal prices,“the bank said.
This is the eighth consecutive cut in almost a year, from 24 per cent in July, when President Recep Tayyip Erdogan sacked the governor for failing to follow instructions on interest rates.
Erdogan’s unorthodox view that lower interest rates mean lower inflation is the opposite of conventional economic theory. His firing of the governor added to investor concerns over the bank’s independence.
The inflation rate was 11.86 per cent in March, down from 12.37 per cent in February.