Turkey Central Bank Cuts Key Interest Rate Again... From 8.75% to 8.25%

[Asia Economy Reporter Choi Saeng-hye] The Central Bank of Turkey has cut interest rates nine consecutive times within a year.

On the 21st (local time), the Central Bank of Turkey held a monetary policy committee meeting and announced that it lowered the benchmark interest rate from 8.75% to 8.25%.

Generally, raising the benchmark interest rate increases the value of the domestic currency against foreign currencies, while lowering the benchmark interest rate decreases the value of the domestic currency. However, President Recep Tayyip Erdogan appointed Murat Uysal as governor last July, arguing that high interest rates induce inflation. Since taking office, Governor Uysal has implemented eight rate cuts over ten months, lowering the benchmark interest rate from 24% to 8.75%.

Due to the Central Bank of Turkey's rapid benchmark interest rate cuts, domestic and international economic experts have raised concerns that the value of the lira could plummet. In fact, on the 7th, the lira exchange rate dropped to 7.2690 lira per dollar, marking an all-time low in the lira's value against the dollar.

As of 2 p.m. on the day, the lira was trading at around 6.78 lira per dollar, but this still represents about a 15% decline in value compared to the beginning of the year when it traded around 6 lira per dollar.

As the lira's weakness continues, Turkish authorities are pushing to establish or expand currency swap agreements with the Group of Twenty (G20) countries. (A currency swap is a contract that allows countries to deposit their own currency with another country and receive that country's currency or dollars in return during emergencies such as foreign exchange crises.)

The Central Bank of Turkey announced that it has decided to raise the limit of the currency swap agreement with Qatar to 15 billion dollars.

This content was produced with the assistance of AI translation services.