The Central Bank of Turkey announced a rise of 200 basis points, double that expected by the markets, with the aim of curbing inflation.
The Turkish Central Bank (TCMB) announced this Thursday a record rise in its benchmark interest rate of 200 points to 19%, double the maximum projected by analysts, in a decisive action that sends a clear message to the markets about the resolution of the entity to curb inflation and support the exchange rate of the Turkish lira.
In a statement issued after the monthly meeting of its monetary policy committee, the TCMB insisted that it will resolutely maintain a strict policy as long as necessary and that, if needed, there will be further increases in interest rates, especially after that the latest inflation data for February registered a worrying rise in prices of 15.6%.
“Taking into account the forecasts of risk of increased inflation, the behaviour of prices and the expected inflation in the medium term associated with these events, the Monetary Policy Committee has decided to implement a strong monetary policy,” the statement underlines.
The TCMB adds that, considering the inflation forecasts for 2021, this policy will be maintained until there are strong indicators that point to a permanent reduction in inflation and price stability. The move was well received by the markets, and the Turkish lira responded by gaining 2% in value against the US dollar, its biggest gain in two weeks.
The decision made by the Turkish Central Bank is in fact seen as proof of the determination of its governor, Naci Ağbal, to fight inflation at all costs, especially after the economic reforms recently announced by Erdoğan; this is the opinion of analysts, who did not expect a rise of more than 100 basis points after the TCMB approved a sharp increase in interest rates of 475 points at the end of 2020.
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Edited and reviewed by:
Pablo Gómez is a specialist in Turkey and has been editor-in-chief of Hispanatolia since 2011. He has been analysing current affairs and geopolitics in Turkey and the surrounding region since 2006.
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