Turkey raises interest rate again to 45 after inflation nears

Turkey raises interest rate again to 45% after inflation nears 65% –

Residents wait at a bus stop under a large Turkish flag in Istanbul, Turkey, on Sunday, April 30, 2023.

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The Turkish central bank raised its key interest rate by another 250 basis points to 45% on Thursday.

The increase in the one-week reference repo rate was in line with economists' expectations.

This comes amid an ongoing battle by Turkish monetary policymakers against double-digit inflation, with the rate hike being the latest step in that effort.

Inflation in Turkey rose to 64.8% year-on-year in December, compared to 62% in November, and the local currency, the lira, hit a new record low against the US dollar in early January, breaking through the 30-point mark for the greenback for the first time.

Analysts expect this to be the last increase for some time, especially with local elections approaching in March.

The central bank's decision is the latest in a series of interest rate hikes – now eight consecutive hikes since the May 2023 elections – that have been painful for Turks as the country grapples with a dramatically weakened currency and skyrocketing living costs.

The high inflation of recent years is largely the result of the Ankara government's stubbornly loose monetary policy.

The lira has fallen 38% against the dollar since the start of the year and has lost more than 80% of its value against the greenback over the past five years.

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