The Turkish Central Bank sharply raises its key rate

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The Central Bank of Turkey raised its main key rate to 15% on Thursday. A final effort to stop the descent into hell of the Turkish lira. For years, the country’s economy, fragile and unbalanced, has been undermined by inflation which has recently approached 12%.

This rate hike is a real credibility test that the new central bank governor, Naci Agbal, has just passed. The markets were very worried after the departure of his predecessor, Murat Uysal. The day after his dismissal, the Minister of Finance Berat Albayrak, son-in-law of President Reçep Tayyip Erdogan, had resigned.

The arrival of the new governor has visibly changed the situation. The Turkish lira, strongly eroded in recent years, has recovered spectacularly. Sign of the satisfaction of economic circles after the announcement of the Central Bank, the currency jumped 2% against the dollar, before stabilizing at around 7.60 against a greenback at 12h UT on Thursday.

Reassure investors

The rate hike therefore seems satisfactory for the moment. Its objective is to reassure investors and convince them that a real change in the direction of economic policy is underway. However, President Erdogan regularly criticizes high interest rates, accusing them of being the root of all evil.

But experts are unanimous: with its raised rates, Turkey has a better chance of stemming the spiral of inflation.

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