The reduction in the rate of the Turkish central bank has led the lira to a new record low, writes Reuters

LONDON (Reuters) – Turkey’s central bank cut its reference interest rate again, as expected, by 100 basis points to 14 per cent on Thursday despite inflation rising above 21%, bringing the lira back to a record low.

Below is the reaction of analysts to the latest move:

JOHN HARDY, SAXO BANK

“Turkey reduces 100 bps to 14.0% as expected, but still amazing”

DENNIS SHEN, SCOPE ASSESSMENTS

“The central bank’s tolerance of lira pain certainly seems much greater in this case where (President Tayyip) Erdogan is now more or less fully in charge of rate policy.”

The only thing is that even if the destabilizing devaluation of the lira somehow fully justifies itself as a good for correcting the current account and increasing exports, now that the lira crisis is starting to slow down growth conditions – whether such a weakening economic growth could force Erdogan to change course before the election until 2023?

If so, any ‘change of course’, however, does not necessarily mean an increase in the rate even if the central bank stops reducing interest rates at least in the near future, instead it potentially means capital controls, more currency swaps with domestic banks and friendly allies and the use of lira support reserves if the pressure to sell the lira continues. “

JASON TUVEY, CAPITAL ECONOMICS

“Today’s move provides additional evidence, if needed, that macro development plays a small role in formulating CBRT policy.”

“An accompanying statement suggests that the easing cycle will be on hiatus early next year, but even so, the lira will remain under pressure and capital controls are likely.”

IPEK OZKARDESKAYA, SWISSQUOTE BANK

“Turkey’s central bank has decided to withdraw rates 100 basis points lower despite a major objection from the market. It is a bold move that will surely cost Turkey a lot of money and headaches. The knee-jerk reaction is a tough sell-off in lira. end the year within the range of 17-19. ”