The Turkish Central Bank raises interest by 750 basis points

The Central Bank of Turkey raised the main interest rate “repo” by 750 basis points to 25%, which shocked the markets that were priced at a hike of only 250 basis points, which pushed borrowing costs to their highest levels since January 2004.

The central bank’s decision to raise interest rates was driven by the goal of establishing a deflationary path as soon as possible, stabilizing inflation expectations, and controlling the deterioration in pricing behaviour.

Recent indicators point to a continuation of the upward trend in inflation. Despite these challenges, the Committee still believes that a slowdown in inflation will be achieved in 2024.

The central bank affirmed its commitment to continue the process of monetary tightening, reinforcing the stance of strengthening monetary policy as necessary in a gradual manner until there is a significant improvement in inflation expectations.

The Turkish Central Bank kept interest rates unchanged in the May, April, March, January and December meetings after ending the easing cycle, which President Recep Tayyip Erdogan called for, after it reduced them by half a percentage point at the February meeting as part of the steps Turkey took to help the country recover from the crisis. repercussions of the great earthquake.