Turkey’s central bank hikes rates 475 points

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Turkey’s central bank raised the one-week repo rate by 475 basis points to 15 percent on Thursday in a bid to boost the struggling lira after President Recep Tayyip Erdoğan appointed a new bank governor.

The lira rallied nearly 1 percent after the hike.

The decision came after Erdoğan last week pledged reforms and a new era in the administration of the economy to lure foreign investment.

The bank’s policy committee said the step would lower double-digit inflation, reverse a harmful dollarization trend and help it rebuild depleted foreign reserves.

“The tightness of monetary policy will be decisively sustained until a permanent fall in inflation is achieved,” the committee said.

The rate hike, the sharpest in more than two years, could support the lira after a series of record lows. However, it could also hinder economic recovery from coronavirus fallout.

In response, the lira firmed to 7.54 against the dollar, from around 7.71 beforehand.

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