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Turkey’s biggest bank has unexpectedly cut interest rates on Thursday, despite a sharp rise in inflation that has completely changed money in lending.
The lira fell more than 1.5% following the election, regularly dropping TL8.80 to US dollars.
The bank’s finance committee reduced its volume to 18%, with surprising analysts not predicting changes, according to a Bloomberg and Reuters survey.
The inflation rate reached 19.25% last month. But Sahap Kavcioglu, who became chief banker in March later his successor was fired while raising inflation rates, he faced challenges from President Recep Tayyip Erdogan to reduce borrowing costs.
Kavcioglu’s election disrupted financial markets as he was anxious to pursue money illegally. The lira has dropped more than 15% since its inception with inflation doubling in the last four years.
The central bank thought the rise in inflation was “due to short-term trends” as monetary policy “began to show higher levels of inflation than expected”. In doing so, it ruled that “re-evaluating the extent to which the financial statements are required and that the concept of opinion is considered to be reduced”.
Kavcioglu, a reporter for an old newspaper, shares Erdogan’s unconventional view that large-scale borrowing is hampering rising oil prices. He repeatedly promised that they would put them better than the rising prices, so that the money could pay for the goods made by the lira. The fund has been pushing hard over the summer when foreign investors started print arrested by government agencies.
But Erdogan has indicated he wants to be reduced by September, saying lower prices will return to running prices. Kavcigolu pointed out this month that the cut could come as a result of a move by the bank to keep prices low, which does not include food and energy prices.
“This is crazy, it’s funny,” said Tim Ash, an emerging market expert at BlueBay Asset Management. “Prices are going up and up so there is no good reason for this other than politics. Erdogan’s gambling is a cry because he is losing his popularity and he wants the economy to prosper. This is not the right big bank, that’s Erdogan’s problem. ”
Turkish $ 730bn it is growing at an alarming rate at least twenty this year. Erdogan wants to grow faster as the support of his ruling party falls on the electoral process. Research shows that the Turkish people are not very happy with inflation, unemployment and economic growth.
“Kavcioglu has been well aware of what happened to previous governors who defied President Erdogan’s desire to lower prices and possibly pursue policies to save his job,” Jason Tuvey, a budding economist at Capital Economics, wrote the letter to clients.
Thursday’s move, Tuvey added, “would have undermined Kavcioglu’s loyalty”.
In contrast, in the busy days of central banks, South Africa maintained a fixed interest rate of 3.5% as expected, while Norwegian prices rose by 25 points from zero.