[Regnum] The Central Bank of Turkey raised the interest rate from 45 to 50% on March 21, the regulator’s press service reported.
“The Monetary Policy Committee decided to increase the interest rate (the weekly repo auction rate) from 45 to 50%,” the Turkish Central Bank said.
It is noted that the committee also decided to make adjustments to the operational framework of monetary policy by setting overnight borrowing and lending rates at 300 basis points below and above the weekly repo auction rate, respectively.
The regulator explained that last month the monthly inflation trend was higher than expected. The Central Bank cited inflation in the service sector as the reason. At the same time, domestic demand remained strong, although imports of consumer goods and gold into Turkey slowed in February and contributed to an improvement in the current account balance.
Inflationary pressure is associated with the inflexibility of inflation in the service sector, inflation expectations, geopolitical risks and food prices, the regulator noted.
Turkey's central bank will maintain tight monetary policy until the country experiences a significant and sustained decline in the country's underlying monthly inflation trend and inflation expectations reach the projected range of forecasts, the institution said.
This interest rate was a record since 2003. The Turkish Central Bank raised the key rate to 45% on January 25. Analysts did not predict a new increase. The previous increase took place on December 21, 2023 - up to 42.5%. A year ago, the key interest rate of the Turkish Central Bank was at eight and a half percent.
As Regnum reported, on June 22 there was a sharp increase to 15%. This happened after the presidential elections in Turkey and the appointment of Hafize Gaye Erkan as chairman of the bank. The board of directors said that inflation is almost 40% and needs to be reduced to five percent.
The National Institute of Statistics Turkstat reported at the beginning of 2024 that annual inflation in Turkey amounted to 64.77% in December, and in November it was 62%.