Turkey’s central bank told analysts in a call that it would assess the impact of its current interest-rate easing cycle in the first half of 2022, according to an official with direct knowledge of the matter.
The remarks by bank Governor Sahap Kavcioglu were meant to reinforce the message that policy makers see limited room for further rate cuts, and that the bank will consider halting a series of reductions in the benchmark following its December meeting, the official said, asking not to be identified because the remarks were not public.
The governor’s comments put him at odds with President Recep Tayyip Erdogan, who pledged to keep lowering interest rates until elections scheduled for 2023. That rattled the lira, which slumped to a record low against the dollar earlier this week, prompting the monetary authority to directly intervene in the foreign-exchange market for the first time in nearly eight years.
Erdogan Says Turkish Economy Will Thrive With Lower Rates
The lira was little changed after reports of Kavcioglu’s meeting and was trading 1.3% lower at 13.4527 per dollar at 1:38 p.m. in Istanbul.
The bank has come under criticism from investors and analysts for cutting its benchmark one-week repo rate by 4 percentage points since September to 15%, while consumer inflation accelerated to nearly four times the official target of 5%. The lira lost more than a quarter of its value last month alone, bringing this year’s losses to nearly 45%, more than any other major currency tracked by Bloomberg.
Below are the highlights of Kavcioglu’s remarks during the call. The bank officially declined to comment:
- Kavcioglu saw a deceleration in inflation as transitory factors dissipate
- The governor cited unrealistic and unhealthy prices in the FX market
- The bank sees increasing appetite for investments and job creation
- The bank maintains pledge to accumulate reserves