Turkish Central Bank raises key rate to 25%
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The Central Bank of Turkey raised the key rate immediately by 750 bp. – up to 25%, reported press service of the regulator. This is the third rate increase since the end of June.
“The Committee (on the monetary policy of the Central Bank) decided to continue the process of tightening the monetary policy in order to set a course for deflation as soon as possible, stabilize inflation expectations and control the deterioration in price dynamics,” the press release after the meeting says.
The latest data, the regulator believes, point to a continued upward trend in inflation amid higher levels of domestic demand, price pressure, as well as unsustainable price growth in the services sector. The Central Bank also noted the rise in oil prices and worsening inflationary expectations. As a result, inflation will reach the upper limit of the forecast range by the end of the year.
“The Committee will continue to resolutely use all the tools at its disposal in accordance with its main goal – to ensure price stability,” the Central Bank concluded.
In early June, after being re-elected, President Recep Tayyip Erdogan appointed a new head of the Central Bank, 44-year-old Hafize Gaye Erkan. International experts have welcomed the decision, as Erkan is seen as a supporter of traditional PrEP. In June, the Central Bank of Turkey raised the rate for the first time since March 2021. It almost doubled from 8.5% to 15%. Nevertheless, even then, many experts warned about the insufficiency of these measures.
On July 21, the Turkish regulator raised the rate by 250 bp. p. – up to 17.5%. Analysts predicted that the rate would reach 20%, wrote then Vedomosti.
In October 2022, inflation in Turkey reached 85.5%, the worst figure in 25 years. After the Turkish Central Bank suspended the rate cut in January 2023, inflation slowed down. In May 2023, it was 39.59%, and in June it was 38.21%, with a target of 5%.
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