Central bank slashes borrowing costs by 250bp as consumer demand slows
Turkey’s central bank lowered its main interest rate for the first time in almost two years, pointing to slower consumer demand and the currency’s strength for a larger-than-expected cut of 250 basis points. Policymakers cut the benchmark rate to 47.5 per cent from 50 per cent in the first reduction since February 2023, when President Recep Tayyip Erdoğan pushed for lower borrowing costs to spur economic growth during his re-election campaign.
“The central bank signalled that they may choose to slow or pause in the forthcoming meetings,” said Hakan Kara, former chief economist at Turkey’s central bank, and noted that the minimum wage increase, far smaller than previous rises, provided “some leeway” for the reduction. Erdoğan said in a post on X late on Tuesday that the minimum wage will be a net 22,104 liras each month, a move welcomed by investors as a sign of his commitment to slowing consumer demand and inflation.
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