Turkey slashes key rate by whopping 100 bps; lira sinks to new record low

Turkey’s central bank cut its policy rate again as expected by 100 basis points to 14 per cent on Thursday despite inflation soaring above 21 per cent, sending the lira to a fresh record low. The lira touched a low of 15.689 after the move, before trimming losses to 15.5 by 1151 GMT.

The dollar has more than doubled in value against the lira this year, rattling Turkey’s big emerging market economy. The central bank’s 100 basis point rate cut, in line with the forecast in a Reuters poll, brought its cumulative easing since September to 500 points, making the local currency even less attractive to investors.

The bank signalled it would pause the easing cycle to monitor its effects in the next three months.

Erdogan’s new economic plan prioritises exports and lending, even though economists and opposition lawmakers have widely criticised the policy as reckless. With inflation soaring above 21 per cent, Turks’ budgets are straining and anxieties are building. The central bank has intervened four times in the currency market in the last two weeks, selling dollars to slow the lira sell-off and eating into its already depleted foreign reserves.