In a surprise move the Turkish Central Bank cuts interest rates by 1.5 percent amid growing evidence of a deepening financial recession in Turkey.

In a surprise move the Turkish Central Bank cuts interest rates by 1.5 percent amid growing evidence of a deepening financial recession in Turkey.

As we reported yesterday economists believed they would only cut rates by half a percentage point.

The Turkish Central Bank is following a similar policy to those in Europe and the US as it tries to minimise the effects of the global economic recession that are accelerating in Turkey.

Recent figures show that the Turkish ‘official’ unemployment rate has risen to just over 12% (double that of the UK’s 6%), car production is down 60% and overall industrial production down nearly 18%.

Bad News for Savers

The central bank has reduced interest rates by 5.25 percent since September 2008.

The average Turkish Lira saver will now receive a real return of just 0.28% after the government deducts its 15% tax on interest and inflation of 9.5% is taken into account.

The British Pound rose slightly against the Turkish Lira after the news to 2.42 TL to the GBP.

Financial Stimulus Package

Meanwhile the Turkish government announced a financial stimulus package on Wednesday involving tax cuts on internet costs and car purchase taxes for cars of 30 years and older, loans to exporters and possible tax holidays for certain manufacturing businesses in the hope of halting the recent increases in unemployment.

The internet tax cuts will see the special communication tax of 15% on internet bills reduce to 5%. This should reduce the average 30 TL bill by around 2 TL per month (4 loaves of standard bread!).

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