Turkey’s Central Bank keeps interest rate unchanged at %9

Turkey's Central Bank (CBRT) has kept the policy rate unchanged at 9 percent for a second consecutive month, after slashing it by 150 basis points in November, under pressure from President Recep Tayyip Erdogan.

The Monetary Policy Committee (MPC) decided to keep the policy rate constant at 9 percent, the central bank said in a statement on Thursday.

In November, CBRT cut interest rates by 150 basis points from 10.5 percent to 9 percent, citing increased inflation risks, despite the country’s inflation rate has reached its highest level in 24 years in October.

It also announced the ending of its cycle of monetary policy easing.

“Considering the increasing risks regarding global demand, the MPC evaluated that the current policy rate is adequate and decided to end the rate cut cycle,” the central bank said.

Turkey's inflation has surged to record highs over the past year after the central bank adopted a rate-cutting policy despite increasing prices. Acting on the orders of President Erdogan who insists on low interest rates, the central bank has lowered the benchmark one-week repo rate from 19 percent to 9 percent since 2021 autumn.

Following the rate cuts in the country, Turkish lira lost around 44 percent of its value in 2021, and a quarter more in 2022.

Erdogan says rate hikes are against his Islamic beliefs and insists that low interest rates lead to lower inflation, an opinion that jars with conventional economic theory that says higher interest rates slow inflation.

On Thursday the central bank said it will continue to use all available instruments decisively until strong indicators point to a permanent fall in inflation and the medium-term 5 percent target is achieved in pursuit of the primary objective of price stability.