In its latest move to address the challenges of soaring inflation, the Turkish central bank increased its key interest rate by 2.5 percentage points on Thursday. The Monetary Policy Committee’s decision marked the seventh consecutive interest rate hike, bringing the benchmark rate to 42.5%.
The inflation rate had surged to 61.98% the previous month, impacting households and their ability to afford rent and essential items.
Despite the substantial rate hikes, the central bank indicated a potential end to this cycle in the near future.
The committee stated, “The committee anticipates to complete the tightening cycle as soon as possible,” emphasizing its commitment to maintaining monetary tightness for as long as necessary to ensure sustained price stability.
The series of rate hikes represents a significant policy shift under President Recep Tayyip Erdogan, who had long advocated for a non-traditional approach of cutting rates to combat inflation.
This change in direction followed Erdogan’s reelection in May, leading to the appointment of a new economic team. The team includes former Merrill Lynch banker Mehmet Simsek as the finance minister and Hafize Gaye Erkan, a former U.S.-based bank executive, who assumed the role of central bank governor in June.
