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Turkey’s central bank unexpectedly cut its benchmark interest rate on Thursday, despite accelerating inflation that had already turned borrowing costs negative in real terms.
The lira tumbled more than 1.5 per cent following the decision, hitting an all-time low of TL8.80 to the US dollar.
The bank’s monetary policy committee slashed its base rate by a full percentage point to 18 per cent, surprising analysts who had predicted no change, according to polls by Bloomberg and Reuters.
Inflation hit 19.25 per cent last month. But Sahap Kavcioglu, who became central bank governor in March after his predecessor was sacked when he raised rates to bolster the currency, has faced pressure from President Recep Tayyip Erdogan to reduce borrowing costs.
Kavcioglu’s appointment spooked financial markets amid worries he…