The Turkish central bank’s surprise decision to reduce its overnight lending rate by 25bp to 10.5% today was dressed up as a move to simplify the monetary setup, but it appears to be a result of sustained pressure from the government to lower interest rates. The damage this does to the Bank’s credibility is all the more worrying in light of concerns that a government loyalist will be appointed to take over at the helm of the Bank once Governor Basci’s term ends next month.
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