Turkey cuts prices with jumbo discount for first time in 22 months.

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Turkey’s central bank cut its key interest rate for the first time in two years, as consumer demand weakened and the currency weakened 250 basis points more than expected.

As President Recep Tayyip Erdogan pushed for lower borrowing costs to spur economic growth during his re-election campaign, policymakers cut the benchmark rate from 50 percent to 47.5 percent from February 2023, the first cut. Economists polled by Bloomberg said the decline was larger than the median forecast of a 48.25 percent decline.

Annual consumer price inflation fell to 47 percent in November, down from 86 percent in October 2022. The government’s decision earlier this week to raise the minimum wage by 30 percent next year could be a boost to the central bank. Move to ease rates, analysts said.

Turkey’s central bank said it saw signs of a slowdown in inflation in December, but said it had not abandoned its tight monetary policy.

“The position will be maintained until there is a significant decline in the underlying trend of . . . monthly inflation,” he said on Thursday.

The bank said on Wednesday it would meet eight times to set rates by 2025 instead of the usual 12 meetings.

Hakan Kara, a former chief economist at Turkey’s central bank, said the central bank has signaled it would prefer to slow or stop at upcoming meetings, adding that the minimum wage hike would provide “some relief” much less than previous increases. For the reduction.

Erdogan said in a post on X on Tuesday that the minimum wage would be a net 22,104 lira ($627) per month, a move welcomed by investors as a sign of his commitment to curbing consumer demand and inflation. A third of Turkish workers receive the minimum wage, and the annual change serves as a guide for other wage increases.

But labor groups called the new wage rate “unacceptable” by the Turkish-ish leader of 1.75mn members.

Consumer prices increased by 0.07 percent for each percentage point increase in Turkey’s minimum wage, the central bank calculated last year. A Turk-ish family of four currently needs a monthly salary of 20,562 lira to clear the level of hunger.

In the year He has dramatically increased his salary to win over voters ahead of the 2023 and 2024 elections. But he has criticized more market-friendly policies to lure foreign investors back, with low interest rates at a time when the country was in the throes of hyperinflation. . Turkey starts raising rates in June 2023.

Analysts say the government must fulfill its promises to cut spending and raise tax revenue to bring down inflation, which is forecast by the central bank to reach 14 percent by the end of next year.

“The central bank is mostly playing its role,” Kara said. Achieving the desired rate of inflation can only be achieved through fiscal and institutional adjustments.