Turkey reaffirmed on Friday its commitment to recent aggressive rate cuts, despite a lira plunge to record lows, with the deputy finance minister and central bank saying inflation would pass and the policy had helped boost commercial loans.
In a historic slide, the lira hit 13.45 against the dollar on Tuesday, triggered by President Tayyip Erdogan's defence of the central bank move to slash the policy rate to 15%, despite near 20% inflation.The currency has lost as much as 45% of its value this year, with around half of those losses occurring since the start of last week. After a rebound in the last three days, it was flat at 12.0795 versus the dollar at 0930 GMT.
Central Bank Governor Sahap Kavcioglu met banking sector officials on Thursday evening and discussed the rate cuts with them, saying they were working in harmony with the sector, with strong communication.On Friday, the central bank said revisions in its monetary policy stance since September had started a recovery in commercial loan growth.
"It is hard to see how Turkish policymakers will come out of this given an unwillingness to engage in more orthodox policies," said Magdalena Polan, principal economist, Central Europe and Middle East, PGIM Fixed Income. "The manipulative attacks waged on the Turkish Lira over our low interest rate policy will not seriously damage our economy," he said.
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