Turkey Central Bank Raises Benchmark Interest Rate from 10.25% to 15%

Following Last Month, Consecutive 2-Month Increase... In Defense of the Lira's Value

President Recep Tayyip Erdogan of Turkey is giving a speech at the ruling Justice and Development Party (AKP) meeting held in Ankara on the 14th of last month (local time).
[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] The Central Bank of Turkey has raised its benchmark interest rate to 15%.

According to Bloomberg on the 19th (local time), the Central Bank of Turkey announced at the Monetary Policy Committee meeting that it raised the one-week repo (repurchase agreement) rate, the benchmark interest rate, to 15%. This is an increase of 4.75 percentage points from the previous 10.25%. This matches the market expectation of 15%. This is the second rate hike after raising rates for the first time in two years last month.

The Central Bank of Turkey explained, "We have decided to implement a transparent and strong monetary tightening policy to eliminate risks to the inflation outlook and to restore the disinflation process (a decline in the rate of price increases due to weakened demand)."

Previously, the Central Bank of Turkey had gradually lowered the benchmark interest rate from 11.25% in January to 8.25% in May. After keeping it steady for four months, it raised the rate last month to defend the value of the Turkish Lira. Generally, raising the benchmark interest rate increases the value of the domestic currency against foreign currencies.

Meanwhile, following this rate hike, the Turkish Lira rebounded by 2.5 percentage points. As of 2:07 PM local time on the day, it was trading at 7.5765 Lira per US dollar.