The Turkish Central Bank surprised markets and analysts on Thursday with a further interest rate hike of another 500 basis points, bringing its one-week benchmark rate to 40%, the sixth rate hike since the arrival of new governor Hafize Gaye Erkan, who has set out to combat Turkey’s high inflation, currently above 60%.
In a statement, the Turkish Central Bank noted however that the current monetary policy of raising interest rates is coming to an end: “The current level is significantly close to the level required to establish a disinflation path”, so “consequently, the path of monetary tightening (through rate hikes) will slow down, and the tightening cycle will be terminated in a short period of time”. Today’s announcement of a new rate hike has surprised the vast majority of analysts and investors, who expect an increase of no more than 300 basis points at best.
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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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