World Economy

Turkey Cuts Interest Rates

Turkey Cuts Interest RatesTurkey Cuts Interest Rates

Turkey moved to reduce its baseline lending rate amidst fears of rising public debt cost and rising inflation, NewEurope reported. This is the sixth consecutive time Turkey’s central bank cuts borrowing costs. This time the cut was by 25 basis points. Many analysts expected a cut of up to 50 basis points. President Recep Tayyip Erdogan’s administration favors consumption-led growth and insists on successive interest rate cuts. Meanwhile, inflation rose to 8.8% in July. This follows a tumbling Turkish lira, triggering a rise across the board of imported goods, including energy. Currency devaluation reflects weakening confidence in the Turkish economy following the July 15 attempted coup. Since July 15 all major credit rating agencies hold a negative outlook for Turkey’s sovereign debt profile. Standard & Poor’s credit rating for Turkey currently stands at BB, Moody’s at Baa3, and Fitch’s at BBB-. Despite the short term negative prospects of the Turkish economy, Turkey has more than halved its public debt since the early 2000s. In 2015, Turkey’s public debt-to-GDP ratio stood at 32.9%, better than most EU member states.