Turkey’s central bank increases interest rates 2 percentage points, lifting embattled lira off record lows.
Not a lot of people saw this one coming.
In a surprise move, Turkey’s central bank raised interest rates by 2 percentage points on Thursday to 10.25 percent – the first time in two years policymakers have increased borrowing costs.
Not a lot of people saw this one coming.
In a surprise move, Turkey’s central bank raised interest rates by 2 percentage points on Thursday to 10.25 percent – the first time in two years policymakers have increased borrowing costs.
Foreign exchange traders have punished the lira this year as Turkey has blown through foreign exchange reserves during the coronavirus pandemic. Soaring demand among Turks for hard currency has also contributed to lira weakness.
But news of the rate hike saw the lira strengthen to 7.5572 on Thursday before giving back some of those gains.
Roger Kelly, lead regional economist at the European Bank for Reconstruction and Development, described the surprise rise as a welcome and “bold” policy decision that illustrated that “lessons may have been learned” from Turkey’s 2018 currency crisis.
“With the lira steadily weakening in the face of real policy rates which are the lowest in the emerging market universe, and attempts to tighten policy using the interest rate corridor seemingly ineffective, the central bank needed to act,” he said.