Turkey’s central bank expected to cut rates as virus concerns deepen
Turkey’s central bank is scheduled to hold a rate-setting meeting today in Ankara—another cut of 50 base points of the country’s 9.75% interest rate is expected.
The effect of COVID-19 on the Turkish economy risks sending the country into its second recession in less than two years. This month, the lira hit its lowest level since August 2018 at 6.94 per USD. Although Ankara has stopped shy of a stay-at-home order, a partial shutdown of the country has ground local businesses to a halt, closed borders and paralysed intercity travel.
Another recession, combined with a need for central government action to combat the COVID-19 pandemic, is likely to see President Recep Tayyip Erdogan tighten his grip on power. Indeed, Erdogan has already taken the liberty of cracking down on dissident social media use across Turkey, arresting hundreds for “provocative posts” about the government’s handling of the outbreak.
While Erdogan has been consolidating power in Turkey since a 2016 coup attempt, unemployment, a renewed currency crisis and a general slowdown—particularly affecting workers in Turkey’s export-dependent agriculture industry—could see the president move to consolidate his power on the economic front, skirting the legislative process and eroding the independence of the central bank.
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