Ankara, (Samajweekly) The Turkish central bank delivered another hefty interest rate increase, the sixth such increase in a row, showcasing its determination to reign in high inflation, experts said.
On Thursday, the bank’s monetary policy committee decided to lift the benchmark one-week repo rate from 35 to 40 per cent, a hike of 500 basis points, substantially exceeding market expectations, reports Xinhua news agency.
“The existing level of domestic demand, the stickiness in services inflation, and geopolitical risks keep inflation pressures alive,” the committee said in a statement.
“The central bank took a bold step and expressed determination in fighting inflation with another substantial rate hike,” Senol Babuscu, a finance professor from Ankara’s Baskent University, told Xinhua.
Babuscu added that the central bank could deliver a final rate hike in December before temporarily suspending the tightening cycle for several months.
Hakan Kara, a former central bank chief economist and a scholar at Ankara’s Bilkent University, said on his X account that the central bank could decide to hike the policy rate to 42.5 or 45 per cent in December, depending on the next inflation data.
Turkey’s annual inflation rate remained steady near 61 per cent in October, official data showed.
New central bank chief, Hafize Gaye Erkan, who oversaw a series of consecutive interest rate hikes since her appointment in June, predicted inflation to reach 65 per cent by the end of the year, rise further through May, and drop to 36 per cent by the end of 2024.
The central bank’s Thursday decision followed a series of giant rate hikes as the country aims to turn around several years of high inflation and a weakened currency which is largely the result of a loose monetary policy defended by President Recep Tayyip Erdogan.
Before the May general elections, Ankara pursued an unconventional policy of low interest rates, despite runaway inflation, and intervened in the foreign exchange market to prop up the lira, the Turkish currency.
In June, Turkey lifted its key interest rate for the first time in more than two years, after Erdogan appointed policymakers who had vowed to bring down inflation.
Erdogan on Wednesday announced that the lira’s decline has come to an end, expressing a strong likelihood of the currency gaining strength against the dollar amid his government’s disinflation program.
