Turkey's Central Bank Shocks with Rate Cut Despite High Inflation

In a surprise move, Turkey's central bank has cut its main interest rate. The bank reduced its policy rate by 150 basis points, from 39.5% to 38%. This decision comes immediately after November's inflation data showed a slower increase than economists predicted. The monthly inflation rate was 0.87%, below market expectations. The rate cut is unexpected because 38% is still an extremely high rate. Central banks typically raise rates to combat inflation, not lower them. The move suggests the bank is prioritizing economic growth, even with inflation far above official targets. The policy rate is the cost at which the central bank lends to commercial banks. It influences all other borrowing costs in the economy. A basis point is one-hundredth of a percentage point.