Turkey upsurges interest prices to 50 percent


(MENAFN) Turkey's central bank has taken decisive action in response to mounting inflationary pressures by implementing a surprise interest rate increase. The move, led by newly appointed governor Fatih Karahan, underscores the regulator's determination to rein in inflation, which soared to 70 percent last year.

The Monetary Policy Committee's decision to raise the benchmark rate to 50 percent represents a significant departure from previous policy trajectories. In tandem with the rate hike, the committee also announced adjustments to the monetary policy operational framework, setting the central bank overnight borrowing and lending rates 300 basis points below and above the one-week repo auction rate, respectively.

This shift in monetary policy marks a departure from the previous trajectory initiated by former governor Hafize Gaye Erkan, who pursued a transition towards more investor-friendly and orthodox economic policies. However, with the abrupt resignation of Ms. Erkan in February, President Recep Tayyip Erdogan appointed deputy governor Mr. Karahan to the helm.

Mr. Karahan, who assumed the top regulatory role just two months ago, has made clear that combating inflation is his paramount concern. While the central bank paused rate increases last month for the first time in eight months, Mr. Karahan has emphasized the readiness of the central bank to take further action if inflation continues to surge.

The inflationary challenges facing Turkey stem from years of unorthodox economic policies under President Erdogan's leadership. In response, a new economic team was installed last year to stabilize the economy and curb consumer prices. Despite these efforts, the central bank anticipates inflation to peak at up to 75 percent in May before gradually declining to around 36 percent by year-end.

As Turkey grapples with chronic inflation, the central bank's proactive measures underscore the urgency of addressing economic imbalances and restoring stability. The decision to raise interest rates reflects a concerted effort to tackle inflation head-on and mitigate the adverse impact on consumers and the broader economy.

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