Turkish central bank raises key interest rate more than expected
The Turkish central bank has raised its key interest rate more significantly than expected. The key interest rate has risen by 5.0 percentage points to 40.0 percent, as the central bank announced in Ankara on Thursday after its monetary policy meeting. Economists had expected an average increase of 2.5 percentage points.
It was the sixth rate hike in a row. The monetary authorities had already raised their key interest rate by 5.0 points in each of the previous two months. Despite the massive increases, the key interest rate is still well below the inflation rate. In October, this was little changed at around 61 percent.
In a statement, the central bank held out the prospect of a slowdown in the pace of interest rate increases. At the same time, it emphasized that monetary policy would remain tight until price stability was achieved. Inflation expectations and the pricing behavior of companies had improved. The stabilization of the Turkish lira has contributed to the greater effectiveness of monetary policy. The slide of the lira this year had initially fueled inflation.
In June, the monetary authorities under their new head Hafize Gaye Erkan initiated a turnaround in monetary policy. At that time, the key interest rate was still at 8.5 percent. Since then, interest rates have been raised in large steps.
The unexpected interest rate increase by the Turkish central bank is a continuation of their monetary policy to combat high inflation. Despite raising the key interest rate multiple times, it remains lower than the current inflation rate.
Source: www.dpa.com
