Experts expect the Turkish Central Bank’s decision to cut interest rates by 1% in favor of Egypt, which is a competitor to Turkey and emerging markets in attracting foreign investments, especially in debt instruments.
While other analysts believe that the decision has no effect on Egypt because it did not bring anything new in light of the deteriorating state of the Turkish economy for some time.
In a big surprise, the Turkish Central Bank cut interest rates by 1% last Thursday, to reach 18%, which some see as a response to pressure from Turkish President Recep Tayyip Erdogan, despite the high inflation rates, which reached 19.25% last month.
The lira fell as much as 1.5 percent earlier on Thursday after the decision, and is among the worst performing in emerging markets for several years in a row, largely due to the central bank’s broken credibility, according to CNBC Arabia.
Observers criticized the decision taken by the Central Bank of Turkey, noting that the decision was the opposite of expectations and led to a deterioration in the price of the Turkish currency.
Numan Khaled, an analyst and assistant director of Arqaam Capital Investment Bank, said that the Turkish Central Bank’s decision is added to the pressure exerted by the Turkish presidency on the Central Bank there for political reasons.
Muhammad Abu Basha, deputy head of research at the Hermes Investment Bank, agreed with him. He told Masrawy that the decision, despite its issuance, contradicted expectations, but it is not strange for the Turkish Central Bank in light of President Erdogan’s control over the survival or departure of the bank’s governors, according to their position on the interest rate. “So the decision has a very important political component.”
Source: Masrawy
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