Türkiye lowered the interest rate
reported by %20%0A
Central bank policymakers cut rates from 50 percent in the first cut since February 2023; They fell to 47.5 percent when Turkish President Recep Tayyip Erdogan promised to lower borrowing costs to spur economic growth during his re-election campaign. According to economists polled by Bloomberg, this decline was greater than the average forecast of a decline of 48.25 percent.
Yearly consumer price inflation hit 47 percent in November, down from a peak of nearly 86 percent in October 2022. The government’s decision earlier this week to increase the minimum wage by only 30 percent next year may have encouraged the central bank to make the cut.
Turkey’s central bank said it saw signs of further easing in inflation in December, but noted it would not abandon its tight monetary policy. According to this bank, this position will be maintained until a significant reduction in the underlying monthly inflation trend is observed.
The bank announced on Wednesday that next year instead of 12 times, it will hold 8 meetings to determine new rates. Hakan Kara, a former chief economist at the Central Bank of Turkey, said the central bank indicated that it may slow or stop interest rate cuts in future meetings.
Erdogan said in an X channel post late Tuesday that the monthly minimum wage would be 2,2104 liras, or $627 net, a move hailed by investors as a sign of his commitment to reducing consumer demand and inflation. is About a third of Turkish workers earn the minimum wage, and the annual change serves as a guide for other wage increases. But labor groups criticized the new wage rate, with the head of the Turk-Ish union, a union with 1.75 million members, calling it “unacceptable”.
According to analysts, the government must now fulfill its commitments to cut spending and increase tax revenues to reduce inflation, which is forecast by the central bank at 14 percent by the end of next year. According to economists, the Central Bank of Türkiye plays its role to a large extent. Achieving desirable inflation targets will be possible only with more financial and institutional adjustments.
