Yesterday, Turkey's Central Bank slashed its key rate by 100 basis points to 14% as expected, and signaled a pause next month, extending President Tayyip Erdogan's unorthodox policy even after the currency spiraled to all-time lows.
The bank said that over coming months it would monitor the effects of the rate cuts that began in September when the one-week repo interest rate (TRINT=ECI) was 19%. The subsequent 500 basis-points of cuts set the stage for the historic lira crash that sent inflation above 21%, prompting economists to widely criticize the policy as reckless given it leaves Turkey's real yields sharply negative.
The lira dove to a new all-time low of 15.689 versus the dollar in response to the decision, and was at 15.39 at 1125 GMT. It has shed more than half its value this year in Turkey's second currency crisis in four years.
The sharp depreciation is expected to send inflation soaring to 30% in 2022, eating deeper into the earnings and savings of Turks who have seen their household budgets and future plans upended over the last two months.