Turkey’s central bank unexpectedly raised interest rates to 50% on Thursday, citing a deteriorating inflation outlook and pledging to tighten further if it looks like inflation is significantly and persistently worsening.
The bank has now raised its key one-week repo rate by 41.5 percentage points from 8.5% since last June, afterThe “tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed, and inflation expectations converge to the projected forecast range”, the bank said.
Piotr Matys, the senior FX analyst at InTouch Capital Markets in London, said the rate hike “stunned the market”, adding: “Today’s decision is a very strong signal that Governor Karahan, who took over from Erkan when she unexpectedly resigned, is determined to bring staggeringly high inflation under control.”