The Turkish Central Bank has raised interest rates in the country to address high inflation. The interest rate was raised by 5 percentage points to 40 percent. This was the sixth consecutive increase. The interest rate move was higher than expected.
Economists polled by Bloomberg News expected an increase of 2.5 percentage points. In October, interest rates also rose by 5 percentage points.
The Turkish Central Bank already began changing the course of monetary policy in June under the leadership of new Governor Hafez Gay Erkan. Then interest rates were raised for the first time in a long time to combat inflation.
A more traditional policy
In recent years, the central bank has actually lowered interest rates despite rapidly rising inflation. This was because Turkish President Recep Tayyip Erdogan believed that higher borrowing costs would boost inflation rather than slow it. But after winning the election this spring, he promised a more conventional fiscal and monetary policy.
Because of these previous interest rate cuts, Turkey’s inflation rate rose to 85 percent last year. The percentage now stands at 61.36 percent, which is very high.
Earlier in the day, the Riksbank kept interest rates unchanged at 4 percent. Consequently, the Riksbank temporarily paused interest rates for the first time after eight consecutive interest rate increases.
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