AFP: Turkey’s central bank has raised its key policy rate sharply for the fifth consecutive month in a bid to combat historically high inflation rates, despite the political complexities surrounding this decision.
The bank announced an increase in its main lending rate to 35% from 30%, citing inflation readings that have consistently exceeded expectations over the past three months, as reported by AFP.
The central bank’s statement also reiterated its commitment to raising rates gradually until a significant improvement in the inflation outlook is achieved. Notably, Turkey’s official annual inflation rate had surged to 85% in October of the previous year and recently exceeded 60%.
This move signifies a significant shift as President Recep Tayyip Erdogan, who had long been opposed to the idea that raising interest rates could combat inflation, had pledged not to allow the central bank to increase its key rate during his tenure. However, following a challenging election in May and a change in economic leadership to a team of Wall Street-trained economists, Erdogan altered his stance.
Erdogan has since demonstrated his support for this new policy team, which has been tasked with addressing Turkey’s severe cost-of-living crisis, marking a pivotal shift in his two-decade rule.
In a recent address to his ruling party members, Erdogan described Turkey’s ongoing battle against inflation as “multifaceted” and acknowledged that the effects of economic measures take time to be felt in people’s daily lives.