Turkey’s Central Bank Raises Key Interest Rate to 50% in Effort to Combat Rising Inflation

Turkey’s central bank has increased its key interest rate to 50% in response to the country experiencing one of the world’s highest inflation rates that rose once again last month.

The decision to raise the policy rate from 45% to 50% was made by the bank’s monetary policy committee, citing concerns over the worsening inflation outlook.

Despite previously stating that their rate hike in January would be the last, the bank found it necessary to address the rising inflation, with the annual rate reaching 67.1% in February.

Following a series of rate adjustments, including a jump from 8.5% to 45% since June, the central bank emphasized that it would further tighten its monetary policy stance if significant and persistent inflation deterioration is anticipated.

This unexpected move by the central bank has been applauded as a positive step in the right direction by economists, indicating a strong commitment to fighting inflation and safeguarding the economy’s stability.

The tightening of monetary policy is seen as crucial as the country prepares for local elections on March 31, with the economy under pressure due to slowing capital inflows and dwindling foreign reserves.

Acknowledging the challenges posed by high inflation, President Recep Tayyip Erdogan has assured the public that measures are being taken to address the cost of living crisis and improve the welfare of citizens.

The decision to raise interest rates ahead of the elections has been viewed as a proactive measure by economists, who anticipate potential further rate increases to counter inflation and stabilize the currency post-elections. This move signals a positive shift in policy and commitment to addressing economic challenges facing Turkey.