One sentence summary – Turkey’s central bank has raised its interest rate to 25 percent in an effort to combat inflation and restore market confidence, marking a departure from its previous policy of keeping rates low and signaling a shift towards a more orthodox approach.
At a glance
- Turkey’s central bank has raised its interest rate to 25 percent.
- This is a significant departure from its previous policy of keeping rates low.
- The rate hike of 7.5 percentage points follows a previous increase from 15 percent to 17.5 percent.
- The central bank’s decision is driven by indicators pointing to a continued increase in inflation.
- This rate increase aims to reassure investors and restore market confidence.
The details
Turkey’s central bank has raised its interest rate to 25 percent.
This is a significant move, indicating a departure from its previous policy of keeping rates low.
The rate hike of 7.5 percentage points follows a previous increase from 15 percent to 17.5 percent.
Experts had anticipated a smaller increase to 20 percent.
The central bank’s decision to raise the interest rate is primarily driven by indicators pointing to a continued increase in inflation.
In an effort to battle inflation and restore market confidence, Turkish President Recep Tayyip Erdogan’s government has taken steps to implement reforms.
This rate increase is seen as a significant step towards reassuring investors and returning to policy orthodoxy.
Erdogan’s previous monetary policy was considered unorthodox by many economists.
He advocated for lower borrowing costs, believing that high-interest rates lead to inflation.
However, the central bank’s recent actions demonstrate a shift towards a more conventional approach.
The Turkish lira experienced a positive response to the central bank’s move, gaining 1.5 percent against the dollar.
This rate hike is expected to help stabilize the currency and strengthen investor sentiment.
In June, the central bank had already increased its key rate from 8.5 percent to 15 percent.
However, the current rate hike is a clear indication of the bank’s commitment to tackling inflationary pressures.
According to the central bank’s projections, they anticipate the annual inflation rate to peak at 60 percent between April and June of next year.
This projection highlights a significant gap between the policy rate and current and expected inflation.
ING bank’s chief economist has suggested that the substantial difference between the policy rate and inflation may have prompted this aggressive rate hike.
The central bank aims to align interest rates with inflation levels to maintain stability and foster economic growth.
Although there is speculation that government officials may have been cautious in implementing reforms due to potential negative reactions from Erdogan, this recent rate hike signifies a stronger commitment to addressing economic challenges.
In summary, Turkey’s central bank’s decision to raise the interest rate to 25 percent is a significant departure from previous policies.
Motivated by indicators pointing to increased inflation, this rate hike aims to reassure investors and restore market confidence.
It represents a shift towards a more orthodox approach, differing from Erdogan’s previous unorthodox monetary policy.
The central bank expects inflation to peak next year, and this rate increase helps address the gap between the policy rate and expected inflation.
The move is seen as a step towards stabilizing the economy and promoting growth.
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| aljazeera.com |
|---|
| – Turkey’s central bank has raised the interest rate to 25 percent, signaling a departure from previous policies of keeping rates low. – |
| The rate hike of 7.5 percentage points follows a previous increase to 17.5 percent from 15 percent. |
| – Economists had expected a smaller increase to 20 percent. – |
| The central bank cited indicators pointing to a continued increase in inflation as the reason for the rate hike. |
| – |
| The Turkish lira gained 1.5 percent against the dollar following the central bank’s move. – |
| The rate increase is seen as a step towards reassuring investors and returning to policy orthodoxy. |
| – Turkish President Recep Tayyip Erdogan’s previous monetary policy was regarded as unorthodox by many economists. – Erdogan’s government has taken steps to battle inflation and restore market confidence. – |
| The central bank’s key rate was previously increased to 15 percent from 8.5 percent in June. – Erdogan had pushed for lower borrowing costs, believing high-interest rates cause inflation. |
| – |
| The central bank expects the annual inflation rate to peak at 60 percent between April and June of next year. |
| – There is a large gap between the policy rate and current and expected inflation, according to ING bank’s chief economist. |
| – Some analysts suspect that government officials may have been cautious in pushing reforms due to potential negative reactions from Erdogan. |
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