ISTANBUL (Reuters) – Turkey’s central bank cut its interest rate by 200 basis points to 16% on Thursday, twice more than expected, bringing the lira down to a new record low, delivering more stimulus targeted by President Tayyip Erdogan despite rising inflation.
In a statement, the bank suggested that there will be a little more room to expand monetary policy until the end of the year.
A Reuters poll estimated the central bank would cut its repurchase rate by 50 or 100 basis points. The bank also surprised markets last month with a 100-bp cut that sent the currency plunging.
The lira retreated 3% to a record 9.501 against the dollar before reducing some of its losses. The currency has accumulated a loss of more than 20% this year, with the biggest drop since the beginning of September, when the bank began to give “dovish” signals (inclined to more expansionary monetary conditions).
Annual inflation rose to 19.58% last month amid rising cost of living in Turkey, including more expensive food and housing. Inflation has been in the double digits for most of the past five years and well above the 5% target
(By Ezgi Erkoyun and Daren Butler)
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