With the central bank on the sidelines, Erdogan’s government is trying to contain prices with VAT cuts on some staples
Picture: BLOOMBERG
A three-month policy pause by the central bank means Turkey’s interest rates are the world’s lowest when adjusted for prices as the cost of everything from food to energy surges. Rate hikes aren’t on the agenda because of President Recep Tayyip Erdogan’s goal of using a cheaper lira to turn Turkey into a manufacturing power. Declines in the currency, which has lost over 9% so far this year, are feeding into inflation by making imports more expensive.
Governor Sahap Kavcioglu has said that support for the local currency would be a key objective in 2022, but has shown little sign this would involve a tighter monetary policy stance. The lira was trading 0.1% weaker at 14.7080/$ in Istanbul. It’s down 9.5% so far this year.
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