News Brief
Central Bank Of Turkey Cuts Interest Despite Rampant Inflation & Currency Crisis; Erdogan Quotes Verse From Koran Forbidding Interest
Swarajya Staff
Jan 04, 2022, 08:52 AM | Updated 08:52 AM IST
Save & read from anywhere!
Bookmark stories for easy access on any device or the Swarajya app.
The Turkish lira plunged to a record low against the dollar on Thursday (Nov 18) after the country's central bank slashed interest rates for the third consecutive month following relentless pressure from President Recep Tayyip Erdogan.
The central bank under governor Sahap Kavcioglu defied conventional economic policymaking and reduced repo rate from 16 to 15 percent despite rampant inflation and a fast-depreciating currency.
The interest rate was 19% in the beginning of September and has been slashed by 400 basis points by the central bank since then due to Erdogan's pressure
Inflation in Turkey has accelerated to almost 20% in October, a level last seen in the wake of a currency crisis three years ago. The lira has lost around a third of its value against the dollar since December and is poised for a ninth straight yearly loss. It has weakened more than 20% since the central bank started cutting rates in September.
Erdogan has previously fired a number of central bank governors who have not agreed with his unorthodox belief that high interest rates cause inflation instead of helping combating it.
In conventional policy making, if facing a rising inflation then a country's central bank needs to increase interest rates to drive price increases down again. The higher the inflation, the higher rates need to go to combat it.
In a speech he delivered to his ruling AKP party members in the parliament on Wednesday, Erdogan justified his decision with a verse from the Koran which strictly forbids interest.
Erdogan has once described interest rates the "mother and father of all evil."
"I cannot stand by those who defend interest," he said.
Erdogan has continued his war on interest rates despite Turkey's opposition parties and businesses urging him repeatedly to tame inflation and stabilise the currency.
Turkey's opposition leader called Kemal Kilicdaroglu termed Erdogan the real "central bank governor" and accused him of dragging the country into catastrophe.
Save & read from anywhere!
Bookmark stories for easy access on any device or the Swarajya app.
Support Swarajya's 50 Ground Reports Project & Sponsor A Story
Every general election Swarajya does a 50 ground reports project.
Aimed only at serious readers and those who appreciate the nuances of political undercurrents, the project provides a sense of India's electoral landscape. As you know, these reports are produced after considerable investment of travel, time and effort on the ground.
This time too we've kicked off the project in style and have covered over 30 constituencies already. If you're someone who appreciates such work and have enjoyed our coverage please consider sponsoring a ground report for just Rs 2999 to Rs 19,999 - it goes a long way in helping us produce more quality reportage.
You can also back this project by becoming a subscriber for as little as Rs 999 - so do click on this links and choose a plan that suits you and back us.
Click below to contribute.