Turkey increases interests prices to 40 percent

(MENAFN) In a surprising move, Turkey’s central bank raised its key interest rate to 40 percent, marking a substantial 500 basis point increase from the previous 35 percent. The decision, double the expected 250 basis points, reflects the central bank's determination to address the escalating inflationary pressures facing the nation. The move is part of a series of interest rate hikes initiated by the central bank, led by its new chief, Hafize Gaye Erkan, a former Wall Street banker, who aims to curb inflation and stabilize the depreciating Turkish lira.

Turkey has been grappling with a staggering inflation rate, reaching 61 percent in October, prompting aggressive measures to mitigate the economic challenges. The central bank's decision to significantly raise interest rates is viewed as a bold step to control borrowing costs and counteract the rapid increase in prices. Market analysts have commended the central bank's proactive stance, emphasizing its commitment to tackling inflation head-on.

Timothy Ash, an emerging markets strategist at BlueBay Asset Management, described the central bank's move as "really impressive" and acknowledged the institution's seriousness in combating inflation. Despite the economic pain experienced by Turks, the central bank, under Erkan's leadership, aims to complete the tightening cycle swiftly and maintain high-interest rates for "as long as needed" to ensure sustained price stability.

The decision comes at a crucial juncture for Turkey, as the country endeavors to reverse years of skyrocketing inflation and a weakened currency, largely attributed to the government's loose monetary policy. The central bank's strategic approach aims to instill confidence in the financial markets and lay the groundwork for economic recovery in the face of challenging economic conditions.
 

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