Inflation is over 80 percent, the lira is depreciating, even as Turkey cuts interest rates. Turkey’s central bank cut interest rates to 13 percent from 14 percent on Thursday. The central bank argues that geopolitical risk has been reduced.
The Turkish lira is depreciating in tandem against the US dollar. Prices have halved in the last 12 months. In the last five years, the value of the lira has fallen six times against the dollar.
But Turkish people are more worried about inflation. Now the inflation rate is 80 percent. It may increase by the end of this year.
Turkey is reducing interest rates in this way on the orders of President Erdoğan. Erdoğan believes that lowering interest rates will reduce inflation. But economists around the world have the opposite idea. They believe that in such a situation, lowering interest rates will increase inflation.
But Erdoğan is not willing to deviate from his opinion. He insisted the central bank to follow his policy. Since 2019, he has replaced three heads of the Central Bank. Elections in June next year. Erdoğan had earlier promised to speed up economic development.
Last year, the central bank cut interest rates several times with controversial decisions.
Its impact has been on inflation and the value of the lira.
Meanwhile, Norway is trying to keep inflation under control by raising interest rates. Norway’s central bank raised its base rate to 1.75 from zero.5 on Thursday.
New Zealand also raised interest rates last Wednesday. Since 2008, the rate of inflation in Western countries has been very low. They managed to maintain this condition for years.
But the Corona pandemic and the Russia-Ukraine war have completely changed the situation. Inflation is increasing in almost all countries of the world. After that, the Central Bank of America, Canada, Australia, Sweden and the Reserve Bank of India also increased interest rates.