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Turkey nearly doubles interest rate in Erdogan policy U-turn
The bank hiked the rate to 15 percent from 8.5 percent in its first meeting since Erdogan filled his government with investor-friendly faces after winning tight May polls.
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People visit a currency exchange office, after Turkish President Tayyip Erdogan was declared the winner in the second round of the presidential election, in Istanbul, Turkey, on May 29, 2023. (Reuters/Hannah McKay)
T
urkey's central bank on Thursday reversed years of unconventional economics promoted by President Recep Tayyip Erdogan and nearly doubled its key interest rate to fight inflation and steady the troubled lira.
The bank hiked the rate to 15 percent from 8.5 percent in its first meeting since Erdogan filled his government with investor-friendly faces after winning tight May polls.
It added that this was only the start of a process aimed at bringing Turkey's annual inflation rate of nearly 40 percent to single figures "as soon as possible".
"Monetary tightening will be further strengthened as much as needed in a timely and gradual manner until a significant improvement in the inflation outlook is achieved," the central bank said.
Fitch Ratings said it expected the benchmark rate to reach 25 percent by the end of the year.
But the lira still lost four percent of its value against the dollar due to investor disappointment that the bank had decided to pursue a more gradual rate-hiking course.
"Not enough. They needed to front load hike," BlueBay Asset Management economist Timothy Ash remarked.
