ANKARA, Jul 21 (NNN-XINHUA) – Türkiye’s central bank, yesterday raised its benchmark interest rate by 250 basis points to 17.5 percent from 15 percent, in a move against high inflation and currency fluctuations.
The central bank “decided to continue the monetary tightening process, to establish the disinflation course as soon as possible, to anchor inflation expectations, and to control the deterioration in pricing behaviour,” the institution’s monetary policy committee said.
To improve market mechanisms and stability, the committee will gradually “simplify and improve the existing micro- and macro-prudential framework” and pledges quantitative and credit tightening to support the rate hike, it added.
The hike came nearly a month after the Turkish central bank hiked its main rate by 650 basis points to 15 percent on Jun, 22, in a policy turnaround towards monetary tightening.
Turkish President, Recep Tayyip Erdogan, had previously advocated low-interest rate policies, believing they would help curb inflation. However, the Turkish lira has experienced a significant decline of over 60 percent in value against the U.S. dollar, in the past two years.
To address the economic problems, Erdogan appointed former U.S.-based bank executive, Hafize Gaye Erkan, as the central bank governor, and Mehmet Simsek, a well-known former banker, as the treasury and finance minister, signalling a return to more orthodox policies.
Turks have long been suffering from high cost of living, driven by soaring inflation, which hit a 24-year high of 85.5 percent in Oct, last year, before falling to 38.2 percent.– NNN-XINHUA
