Turkish President Tayyip Erdogan gives a statement after a cabinet meeting in Ankara, Turkey, May 17, 2021.
Murat Cetinmuhurdar | Reuters
Turkey’s central bank on Thursday slashed its policy rate by 50 basis points from 9% to 8.5% as the country continues to reel from the aftermath of a devastating quake which affected millions of lives.
The move, which marks a resumption of a series of interest rate cuts in 2022 in spite of high inflation, was in line with Reuters’ expectations and is the lowest one-week repo rate in more than two years, according to Refinitiv data.
“It has become even more important to keep financial conditions supportive to preserve the growth momentum in industrial production and the positive trend in employment after the earthquake,” the central bank said in a press release, adding that the impact of the earthquake is still being extensively evaluated.
Two consecutive quakes rocked Turkey and Syria earlier this month, and were the region’s strongest in nearly a century with a death toll of more than 46,000 lives thus far.
“While the earthquake is expected to affect economic activity in the near term, it is anticipated that it will not have a permanent impact on performance of the Turkish economy in the medium term,” the statement said.
The country’s most recent annual inflation rate in January stood at 57.68%.
With reconstruction costs estimated to rack up to billions of dollars, the disaster has further embroiled Turkey in its downward economic spiral.
Turkey’s monetary policy is premised on a pursuit of growth and export competition rather than soothing inflation. Turkish President Recep Tayyip Erdogan espouses the unorthodox view that raising interest rates increases inflation, rather than taming it.
The policy dramatically weakened Turkey’s currency last year and pushed the country’s inflation rates to record highs.
The Turkish lira held steady at 18.87 against the greenback following the central bank decision.
