A return to orthodox fiscal policies in Turkiye has seen a steep rise in interest rates as the Turkish government and Central Bank seek to check rampant inflation.
On Thursday, as expected, the Central Bank announced a rise in interest rates – the seventh consecutive monthly increase.
The 250 basis points means interest rates now stand at 42.5% in Turkiye. The rise was more modest than the previous three months, where rates have increased by 500 basis points each time.
The Bank said that monetary “tightness will be maintained as long as needed to ensure sustained price stability,” while adding that policy was “significantly close to the level required to establish the disinflation course.”
When President Recep Tayyip Erdoğan appointed Hafize Gaye Erkan Governor of Turkiye’s Central Bank and re-appointed Mehmet Şimşek as Finance Minister in June 2023, the cost of borrowing stood at 8.5%. The five-fold increase is intended to help curb inflation, which remains stubbornly high.
Inflation rose to 61.98% in November 2023, but it is down from the record high of October 2022, when it rose to 85.5%.
