Money, Turkish lira

Turkish Central Bank approves sharp rise in interest rates

The Central Bank of Turkey announced a tighter monetary policy to curb inflation and the depreciation of Turkish lira.

The Turkish Central Bank (TCMB) announced on Thursday a sharp rise in interest rates by 475 basis points to 15%, with the aim of curbing inflation and the depreciation of the Turkish lira: a measure that comes after the recent appointment of a new minister of Economy in Turkey after his predecessor and Erdoğan’s son-in-law, Berat Albayrak, announced his resignation.

This significant rate hike, which occurs in line with market expectations, also takes place under the chairmanship of the new TCMB governor, former Finance Minister Naci Ağbal. In a statement, the Turkish Central Bank explained that it will follow a transparent and adjustment policy to eliminate risks in the Turkish economy.

“The Committee (on Monetary Policy of the Central Bank) has decided to implement a strong tightening of monetary policy to eliminate the risks on inflation forecasts, to contain the prospects for price increases, and restore the disinflation process,” said the release.

This new policy is expected to help lower Turkish inflation below 10% and to revalue the Turkish lira, which after the announcement of the rate hike managed to rise 2.5% against the US dollar in markets. Last week, Turkish President Tayyip Erdoğan himself announced a further tightening of monetary policies with the aim of achieving economic stability and attracting foreign investment.

“In the coming months, all the factors that affect inflation will be taken into account, and the restrictions in monetary policy will be firmly maintained until a permanent fall in inflation is achieved,” underlined in its statement after the rise in rates the Turkish Central Bank, highlighting the importance of preserving a low inflation rate environment to achieve financial stability and maintain a positive macroeconomic trend.