Turkey’s central bank surprisingly cut interest rates on Thursday, even though inflation in the country is close to 80 percent. Normally, central banks raise their interest rates when inflation is high.
The country’s key interest rate has stood at 14 percent for the past seven months. That was reduced by a full percentage point to 13 percent.
The key interest rate is usually raised to curb inflation. Major central banks around the world, such as the European Central Bank, the US Federal Reserve and the Bank of England, all recently raised key interest rates.
But the policy of Turkish President Recep Tayyip Erdogan deviates from this. He chooses – with direct influence on the central bank – to keep interest rates as low as possible. With this he wants to stimulate the economy instead of slowing it down, with the result that inflation will only rise further.