The Turkish Central Bank is raising interest rates sharply again as part of the fight against high inflation in the country.
The interest rate in Turkey was raised by five percentage points to 35 percent.
This is the fifth consecutive increase by the Turkish Central Bank.
New central bank governor Hafid Gay Ercan has made several big jumps in interest rates since taking office this summer. Most recently, the interest rate was raised from 25 to 30 percent in September.
The central bank wrote in Thursday’s press release that it chose to continue tightening, among other things, to “create… Slowing inflationSlowing inflationDeflation describes a situation in which price inflation subsides. It should not be confused with deflation, which is when prices fall. “The course as quickly as possible.”
Economists had previously expected the interest rate to be raised to exactly 35 percent, according to him Reuters poll.
Price growth of more than 60 percent
Türkiye has long suffered from sharp price increases. The annual price increase has exceeded 20 percent for about two years. Inflation peaked in the fall of 2022, when it reached more than 85 percent.
Since then, inflation has fallen slightly, but stocks are starting to point higher this fall.
Price inflation in Turkey rose to 61.5 percent in September, compared to the same period last year.
The Central Bank indicates that inflation was lower than expected in the third quarter. In the press release, they claim that the pressure on price growth from wages and currency, as well as the fallout from the tax changes, has largely ended.
Furthermore, the central bank points to strong demand in Turkey, still-high service price growth, and inflation expectations as elements keeping price growth high. Oil prices and geopolitical turmoil were also highlighted as an element of uncertainty.
The inflation target set by the Turkish Central Bank is to increase prices by 5 percent. Economists asked in the Reuters poll expect inflation to exceed 40 percent near the end of 2024, and about 25 percent at the end of 2025.
A U-turn from Erdogan
Turkey and President Recep Tayyip Erdogan have long chosen an unconventional approach in combating rising prices.
Unlike almost all economists, Erdogan was previously convinced that high interest rates lead to inflation. The country’s central bank cut interest rates several times despite the significant rise in prices
After Erdogan won the elections at the end of last May, things changed, and interest rates rose sharply since last summer.