Turkey's central bank ends string of interest rate cuts

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Turkey’s central bank kept a key interest rate unchanged on Thursday, halting a string of rate cuts that triggered a currency crisis and sent consumer prices skyrocketing.

The bank’s Monetary Policy Committee said it decided to keep its policy rate “constant” at 14%, putting on hold a rate-cutting policy that has reduced borrowing costs by 5 percentage points since September despite soaring inflation. By contrast, many other central banks have increased rates to control surging prices.

Turkish President Recep Tayyip Erdogan insists on lowering borrowing costs to boost growth. He has long argued that high interest rates cause inflation, even though economists say raising them is the way to tame soaring prices.

Erdogan has turned to unconventional measures to halt the depreciation of the Turkish lira instead of raising interest rates. The measures include a program that encourages people to keep their savings in lira through guarantees to compensate losses from the decline of the Turkish currency. Economists warn the system could put an extra burden on the treasury.

The lira, which lost around 45% of its value against the dollar last year, strengthened slightly against the U.S. currency following Thursday’s interest rate decision.

Inflation in Turkey surged 36% last month — reaching a 19-year high and leaving many in the country of nearly 84 million struggling to buy food and other basic goods.