Turkey’s central bank hikes interest rates again in further shift in economic policies
Turkey's central bank has raised its key interest rate by 5 percentage points to 30%
ISTANBUL — Turkey’s central bank raised its key interest rate by 5 percentage points Thursday, another large but expected hike that signals a continued push toward more traditional economic policies under President Recep Tayyip Erdogan.
The bank hiked its policy rate to 30%, saying it has kept up the “monetary tightening process” to combat rampant inflation and control price instability. Its statement said inflation in July and August was “above expectations," hitting 58.94% last month.
It takes Turkey into a more typical economic approach after critics blamed a series of rate cuts set by Erdogan for making a cost-of-living crisis worse. Turkish households were left struggling to afford rent and basic goods as inflation surged.
Erdogan has long argued that lowering interest rates helps fight inflation, a theory that runs contrary to traditional economic thinking. The Turkish central bank started cutting rates in late 2021 under pressure from Erdogan.
Central banks around the world, meanwhile, have been hiking rates to bring consumer price rises under control following the COVID-19 pandemic and Russia’s war in Ukraine. Now, banks from the U.S. Federal Reserve to Bank of England are hitting pause as they near the end of their aggressive increases.
Turkey has work to do to catch up in its fight against inflation.
After winning reelection in May, Erdogan appointed a new economic team, signaling a return to more conventional policies.
The team includes former Merrill Lynch banker Mehmet Simsek, who returned as finance minister, a post he held until 2018, and Hafize Gaye Erkan who took over as central bank governor.
Before their appointments,
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