Turkey’s Taksim Square with the figure of Kemal Ataturk, the first president, and the Turkish flag in the background.
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Turkey’s central bank on Thursday raised its key interest rate, the benchmark one-week repo rate, by another 500 basis points to 40%.
The increase was double the expectations of economists, who had forecast a 250 basis point increase.
The move was seen as a continuation of the bank’s attempt to combat high inflation and the decline of Turkey’s currency, the lira. Inflation in the country was a whopping 61% in October.
Following the news, the lira was trading at 28.766 per dollar, slightly stronger against the greenback.
Timothy Ash, emerging market strategist at BlueBay Asset Management, was one of the few experts who expected a 500 basis point increase.
“Really impressive move by the CBRT.” [Central Bank of the Republic of Turkey] – test their orthodoxy and significantly exceed expectations,” he said in a note.
“These guys and gals are serious about fighting inflation,” he added. “We have to give them credit for that.”
The central bank’s decision follows a series of interest rate hikes that have been painful for Turks as the country aims to reverse several years of skyrocketing inflation and a dramatically weakened currency – in large part the result of the government’s stubbornly loose monetary policy Ankara is .
The lira has fallen 35% against the dollar year to date and has lost more than 80% of its value against the greenback over the past five years.
This is a breaking news story and will be updated shortly.