Turkey’s Central Bank delivers moderate rate hike
ANKARA — Turkey’s Central Bank hiked interest rates Thursday by another 250 basis points, from 40% to 42.5%.
The moderate hike was largely expected after the bank vowed to slow the pace of its increases and complete a monetary tightening cycle over a short period of time following its previous meeting, in late November. Several polls from earlier this week had suggested an increase of 250 basis points.
The final increase of this year marks the sixth in a row since June, when interest rates stood at 8.5% despite skyrocketing inflation and a dramatic devaluation of the Turkish lira against hard currency.
Turkey’s annual inflation, which peaked at a 24-year high of 85.5% in October 2022, stood at 61.98% in November, according to official data. The Central Bank increased its year-end annual inflation projection from 65% in late October despite successive interest rate hikes to control it.
Turkish President Recep Tayyip Erdogan’s unorthodox economic policy based on the assumption that higher interest rates cause higher inflation is the main driver behind Turkey’s breakneck inflation. He shifted to mainstream economic policies after his victory in the May general election.
