Turkey’s central bank has raised its key interest rate to 50 %. This decision focuses to combat the severe economic challenges faced by households grappling with rising prices for essential goods and services.
The central bank’s surprise rate hike comes as a result to the inflation outlook, with annual consumer price inflation surging to 67 % in February. The sharp increase in prices has put financial strain on many families, making it difficult for them to afford basic necessities such as food, rent, and utilities.
‘Tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed’, said the bank.
President Recep Tayyip Erdogan, known for his economic theories advocating for lower interest rates to control inflation, has faced criticism for his policies.
His strategy of devastating interest rates had initially led to double-digit inflation and a currency crisis. Erdogan changed course and selected a new economic team, which raised the benchmark interest rate from 8.5 % in June to 45 % in January.
Despite previous rate hikes, Bartosz Sawicki, a market analyst at Conotoxia, noted that the Turkish central bank was forced to increase the one-week repo rate from 45 % to 50 %.
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