With the latest step, the central bank has reduced the key policy rate by 400 basis points since September this year.

While announcing the decision of the 11^th Monetary Policy Committee meeting this year, the bank said that “recent increases in inflation had been driven by supply-side factors such as rising food and import prices, especially in energy, and supply constraints.”

For the month of October 2021, inflation rate rose to a 2.5-year-high of 19.89 per cent year-on-year, according to Turkish Statistical Institute. The central bank has raised its year-end inflation forecast for 2021 to 18.4 per cent from the previous estimate of 14.1 per cent.

The lowering of interest rates is a policy adopted by the Turkish government to boost the country’s exports. “This is helping textile exporters earn more money right now. Actually, higher inflation and lower interest rate, and thereby weakening the currency, is the government’s strategy for promoting exports. But it is putting big pressure on people as market prices have gone up like crazy,” according to Suat Idil, who represents Fibre2Fashion in Turkey.

“In the short term, textile exporters might enjoy this, but then when it comes to importing raw materials from abroad it would also affect them in a bad way,” adds Idil.

During January-September 2021, Turkey’s apparel exports increased by 25.72 per cent to $13.364 billion, compared to exports of $10.630 billion during the corresponding period of 2020, according to the data from the Turkish Statistical Institute and the country's ministry of trade.

However, its imports of cotton, cotton yarn and cotton textiles (HS chapter 52) increased at a faster pace by 34.2 per cent year-on-year to $2.553 billion during the same period.

Fibre2Fashion News Desk (RKS)