Turkish central bank increases key interest rate to 17 percent

Turkish Central Bank

Under pressure from President Erdogan, the institution has been under new management since November.

(Photo: Reuters)

Istanbul The Turkish central bank has again increased the key interest rate, thus reacting to the persistently high inflation and the fall in the rate of the currency. The central bank announced on Thursday in Ankara that the key interest rate will be raised by two percentage points to 17 percent.

In November the Turkish President Recep Tayyip Erdogan exchanged the central bank governor in view of the falling national currency, the lira. The new boss, Naci Agbal, had already raised the key interest rate significantly by 4.75 percentage points in November and thus opposed the currency collapse. The lira has recently recovered.

Before that, the country’s central bank was known for avoiding tighter monetary policy, particularly in the form of higher interest rates, as much as possible. Erdogan had previously put strong pressure on the central bank and always spoke out in favor of low interest rates.

The central bank has now announced that it will maintain a tight monetary policy until strong indicators point to a permanent decline in inflation. According to the Turkish statistical office (TurkStat), the annual inflation rate in November was 14.3 percent.

The Turkish lira rose significantly after the decision on all major currencies. In return, the US dollar fell to its lowest rate since mid-November.

More: First meeting under the new head of the Turkish central bank: investors hope for higher interest rates


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