ANKARA, Turkey (AP) — Turkey’s central bank on Thursday kept its main interest rate unchanged for a fourth month even as surging inflation has hit a 20-year high and eroded people’s purchasing power.
In a statement following a monetary policy committee meeting, the bank said it was keeping its policy rate “constant” at 14%.
The decision was in line with President Recep Tayyip Erdogan’s opposition to high borrowing costs in a bid to boost growth, investment and exports. The Turkish leader insists that raising interest rates cause inflation — a position that contradicts established economic thinking.
Turkey’s central bank has cut rates by 5 percentage points since September despite high inflation, then has paused them since January. The series of rate cuts last year triggered a currency crisis and rising consumer prices that have been aggravated by Russia’s invasion of Ukraine and soaring energy costs.
Yearly inflation hit 61.14% in March, deepening the squeeze on households that were already struggling to purchase basic goods. The Turkish lira lost 44% of its value against the U.S. dollar last year.
In comparison, the United States, United Kingdom and the 19 countries that use the euro currency have seen decades-high levels of inflation — 8.5%, 7% and 7.5%, respectively — but are nowhere close to Turkey’s eye-watering rate. Central banks in the U.S. and U.K. have raised interest rates to combat inflation.