The Turkish central bank unexpectedly reduced its benchmark interest rate by 100 basis points to 13% following a seven-month pause despite hints the annual inflation rate would break 80% and reach a 2-year high.
"Increase in inflation is driven by the lagged and indirect effects of rising energy costs resulting from geopolitical developments," the bank noted, sharing expectations the disinflation process will start soon. The latest policy update is "adequate" considering the current outlook, it concluded.
The dollar strengthened against the lira by 0.95% to trade for 18.12 at 1:15 pm CET and neared a fresh record high versus Turkey's national currency set in December last year. According to market analysts, the surprising move was politically influenced by Governor Sahap Kavciogly and President Recep Tayyip Erdogan.
