To combat the nation's skyrocketing inflation, Turkey's central bank increased its benchmark interest rate to 40%.
The increase from the prior rate of 35% was significantly more than anticipated.
However, Turkey's central bank indicated that interest rates were getting close to what was needed to begin reducing inflation.
The rate at which prices increase, or inflation, reached 61.36% in October and is expected to continue rising until it peaks in May of the following year at a rate between 70 and 75 percent.
While central banks throughout the world have increased interest rates in an effort to curb price increases, President Recep Tayyip Erdogan had previously defied economic dogma, claiming that higher rates would instead drive up prices.
But after winning reelection in May, he has taken a different stand.
The central bank has been given permission to raise interest rates from 8.5% to 40% in an effort to make borrowing more expensive and impede price increases, under the leadership of former Wall Street banker Hafize Gaye Erkan.
"The pace of monetary tightening will slow down and the tightening cycle will be completed in a short period of time," the central bank said.
Additionally, it stated that interest rates would remain high for "as long as needed to ensure sustained price stability".
Under President Erdogan's leadership, Turkey's economy had rapid growth in the early years but has faltered since.
A currency crisis occurred in 2021 as a result of the central bank's prior policy of lowering interest rates in spite of significant inflation. As a result, the government launched a plan to shield lira deposits against exchange rate declines.
(Source:www.euronews.com)
The increase from the prior rate of 35% was significantly more than anticipated.
However, Turkey's central bank indicated that interest rates were getting close to what was needed to begin reducing inflation.
The rate at which prices increase, or inflation, reached 61.36% in October and is expected to continue rising until it peaks in May of the following year at a rate between 70 and 75 percent.
While central banks throughout the world have increased interest rates in an effort to curb price increases, President Recep Tayyip Erdogan had previously defied economic dogma, claiming that higher rates would instead drive up prices.
But after winning reelection in May, he has taken a different stand.
The central bank has been given permission to raise interest rates from 8.5% to 40% in an effort to make borrowing more expensive and impede price increases, under the leadership of former Wall Street banker Hafize Gaye Erkan.
"The pace of monetary tightening will slow down and the tightening cycle will be completed in a short period of time," the central bank said.
Additionally, it stated that interest rates would remain high for "as long as needed to ensure sustained price stability".
Under President Erdogan's leadership, Turkey's economy had rapid growth in the early years but has faltered since.
A currency crisis occurred in 2021 as a result of the central bank's prior policy of lowering interest rates in spite of significant inflation. As a result, the government launched a plan to shield lira deposits against exchange rate declines.
(Source:www.euronews.com)
