ANKARA — Turkey’s Central Bank hiked interest rates Thursday by 500 basis points from 25% to 30%.
A statement following its monthly monetary policy committee meeting on Thursday cited rising inflation and fuel prices to justify the hike. “Inflation readings were above expectations in July and August,” it read. “As the strong course of domestic demand and the stickiness of services inflation persist, the increase in oil prices and the ongoing deterioration in inflation expectations pose additional upside risks to inflation.”
It is the fourth interest rate hike since Turkish President Recep Tayyip Erdogan’s U-turn from his unorthodox monetary policy to keep rates low despite high inflation. After his reelection in May, he appointed two conventional economists to manage the country’s finances: Finance Minister Mehmet Simsek and Central Bank Governor Gaye Erkan. The duo pledged for a return to rational economic policies and monetary tightening.
Under Erkan, a former US banking executive, the bank has hiked its policy rates by 2150 basis points over the last three months. After its meeting on Thursday, the bank reaffirmed its pledge, stating, “Given the monetary tightening stance, the Committee is determined to establish the disinflation course.”