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Turkey’s central bank hikes interest rate by 500 basis points to 40%, well above expectations

Turkey’s Taksim Square, with the figure of Kemal Ataturk, the first president, and the Turkish flag in the background.
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Turkey’s central bank on Thursday hiked its key interest rate, the benchmark one-week repo rate, by another 500 basis points to 40%.

The hike was double economists’ expectations, who had forecast a 250-basis-point hike.

The move was seen as a continuation of the bank’s attempt to combat high inflation and a falling lira

The lira

Timothy Ash, emerging markets strategist at BlueBay Asset Management, was one of the few experts who expected a 500-basis-point hike.

“Really impressive move by the CBRT [Central Bank of the Republic of Turkey] – probing their orthodoxy and getting well ahead of expectations,” he said in a note.

“These guys and girls are serious about fighting inflation,” he added. “We need to give them credit for that.”

The central bank decision follows a series of interest rate increases that have been painful for Turks, as the country aims to turn around several years of skyrocketing inflation and a dramatically weakened currency — in large part the result of stubbornly loose monetary policy by the Ankara government.

The lira is down 35% against the dollar year to date and has lost more than 80% of its value against the greenback over the last five years. 

This is a breaking news story and will be updated shortly.

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