Turkey’s central bank has implemented the largest interest rate cut in the last seventeen years. It is a turning point in the central bank’s monetary policy, which last year tackled the high inflation and fall in value of the lira with interest rate hikes.

The most important interest rate is now reduced from 24 percent to 19.75 percent. Among other things, the move is driven by weaker global economic activity, Governor Murat Uysal explained the decision.

With this, the new governor also seems to be responding to President Recep Tayyip Erdogan’s call, who has been pushing for lower interest rates for some time. This also fuels concerns about the independence of the central bank.

Erdogan believes that interest rate cuts should combat inflation. In doing so he deviates from the current opinion in the economic world. On the contrary, most connoisseurs think that interest rate increases prevent inflation. Erdogan fired Murat Cetinkaya as governor earlier this month. Last year he already announced that he wanted to exert direct influence on interest rate decisions.

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