Turkey's Central Bank Hikes Interest Rates to 15% After Governor Appointment

ISTANBUL - In a major policy shift, Turkey's Central Bank almost doubled interest rates to 15% Thursday, signaling a dramatic reversal of its previous unorthodox approach. This decision follows the recent appointment of Hafize Gaye Erkan, a former Goldman Sachs banker, as governor by President Recep Tayyip Erdogan just two weeks prior.

The recent move by Turkey’s central bank to raise interest rates by a significant margin, exceeding previous expectations, aims to combat painfully high inflation rates that have plagued the Turkish economy. JUST IN: 🇹🇷 Turkey’s Central Bank raises interest rates to 15%. This adjustment marks a significant departure from the previous policy of cutting the cost of borrowing in an attempt to control inflation, a strategy that has been widely criticized.

As of today, the one-week repo rate became the policy rate of the Central Bank. The Bank decided that the CBRT overnight borrowing and lending rates would be determined at 150 basis points below and above the one-week repo rate, respectively, further solidifying the commitment to tightening monetary policy.

This decision to push interest rates to 15% is viewed by many analysts as a necessary step to stabilize the Turkish Lira and attract foreign investment. However, the long-term impact of this policy change remains to be seen, and ongoing monitoring of key economic indicators will be crucial.