Turkey’s c.bank hikes rates to 50% in surprise move

Turkey’s central bank has raised its key interest rate from 45 per cent to 50 per cent, citing the continuing need to counter climbing inflation in the country.

The bank’s Monetary Policy Committee (MPC) decided to raise the policy rate (the one-week repo auction rate) from 45 percent to 50 percent. The MPC also decided to adjust the monetary policy operational framework by setting the Central Bank overnight borrowing and lending rates 300 basis points below and above the one-week repo auction rate, respectively.

“In response to the deterioration in the inflation outlook, the Committee decided to raise the policy rate. Tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed, and inflation expectations converge to the projected forecast range.” the bank’s Monetary Policy Committee said in a statement.

“Monetary policy stance will be tightened in case a significant and persistent deterioration in inflation is foreseen. The decisiveness regarding tight monetary stance will bring down the underlying trend of monthly inflation through moderation in domestic demand, real appreciation in Turkish lira, and improvement in inflation expectations. Consequently, disinflation will be established in the second half of 2024.”