Turkey’s central bank hikes interest rate to boost lira

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Photo by M. B. M. (Unsplash)

Turkey’s central bank has raised its one-week repo rate from 8.25 percent to 10.25 percent to boost the ailing lira, in a surprise move that confounded analyst predictions.

Analysts expected the bank to give in to the political pressure from President Recep Tayyip Erdoğan, who has vehemently opposed such a move, and keep its policy rate steady. 

Economists had urged the bank to lift interest rates to ward off a possible repeat of the currency crisis the country witnessed two years ago.

The lira has fallen 22 percent this year against the dollar.

According to the Dünya daily, an increase in the tendency in global markets to avoid risk and the Turkish central bank’s resistance to hiking interest rates have contributed to the sharp decline.

President Erdoğan had previously attracted criticism for what is viewed by analysts as his disregard for central bank independence.

“Of course, our central bank is independent,” he said in May 2018. “But the central bank can’t take this independence and set aside the signals given by the president.” 

The news gave the Turkish currency a boost, which surged more than 1 percent against the dollar to TL 7.6020. 

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