The Turkish central bank reduced interest rates – The exchange rate of the pound is at a historic low

Turkey’s central bank today cut its key interest rate for a second month in a row, from 13% to 12%, and the Turkish lira fell to a historic low against the dollar.

Shortly after 14:00 (Greece time), the rate of the Turkish currency was 18.38 pounds to one dollar, a level that is a historical low.

The central bank, which had already cut its key interest rate by one point last month, justified its decision by again citing “uncertainties regarding global growth and geopolitical risks”.

The Turkish president, who says he favors growth and exports over price stability, had called for further interest rate cuts in June, which have remained steady for months.

Contrary to classical economic theories, the Turkish president argues that high interest rates favor inflation.

A consequence of his widely criticized monetary policy is that the Turkish lira, which had already lost 44% of its value against the dollar in 2021, has since January 1 lost an additional 27% of its value against the US currency.

Due to the collapse of the pound, inflation reached 80.2% year-on-year in August, according to official data, the highest since 1998.

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