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Turkey’s Central Bank shifts gears, hikes interest rates to 25%

The 750 basis point rise was higher than analysts' expectations, prompting lira to rebound from a record low.
People wait to exchange money at a currency exchange shop on June 23, 2023 in Istanbul, Turkey.

ANKARA — Turkey’s Central Bank hiked interest rates Thursday by 750 basis points from 17.5% to 25%. The larger than expected rise prompted the Turkish lira to recover from a record low.

It was the largest rate hike since an overhaul of the country’s economic management team that has pledged to gradually shift to tighter monetary policies. A statement following its monthly monetary policy committee meeting on Thursday announced that the bank was shifting gears to faster monetary tightening, citing Turkey’s runaway inflation, which stood at nearly 50% in July.  

“The committee decided to continue the monetary tightening process in order to establish the disinflation course as soon as possible, to anchor inflation expectations and to control the deterioration in pricing behavior,” the statement read.

The hike prompted the Turkish lira to surge by more than 3%. As of mid-afternoon Istanbul time on Thursday, the lira was worth 26.34 to the dollar after sinking to a record low earlier this week amid expectations of a lower interest rate hike. 

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