Turkey cuts interest rates as Erdogan continues to defy economic wisdom
President Recep Tayyip Erdogan continues to lower interest rates to stimulate economic growth as inflation runs rampant in Turkey.
The Turkish Central Bank announced another interest rate cut today despite high inflation in the country. The bank lowered its one-week repo auction rate from 14% to 13%, according to a press release.
What it means: The one-week repo auction rate is the interest rate at which the central bank sells securities, such as bonds, and then buys them back later — one week later, in this case.
Why it matters: Inflation is rising across the region, in part driven by the disruptions to the global supply chain resulting from Russia’s invasion of Ukraine. Inflation is especially high in Turkey, where annual consumer inflation reached 79.6% in July.
Many central banks in the region have raised interest rates as a result. Economists generally point out that higher interest rates lower inflation by encouraging saving and discouraging spending, thus leading to drops in prices of goods and services, according to Investopedia.
