Turkish central bank surprises with 500 basis point rate hike
Turkish central bank unexpectedly raised its policy rate by 500 basis points to 50%, citing inflation concerns, aiming to stabilize the economy and control rising prices
Market volatility increased after the Central Bank of the Republic of Türkiye's (CBRT) Monetary Policy Committee (MPC) increased the one-week repo auction interest rate, which is the policy rate, by 500 basis points to 50%.
"The Board also decided to change the operational framework and determine the Central Bank's overnight borrowing and lending rates with a margin of 300 basis points compared to the one-week repo auction interest rate," said Fatih Karahan, the central bank chief.
Analysts noted that with this decision, if the central bank deems it necessary, it can make additional tightening by funding the market at 300 basis points of the one-week repo auction rate. Before the decision, overnight borrowing and lending rates were determined with a margin of 150 basis points compared to the one-week repo auction interest rate.
Analysts emphasized that the CBRT's steps show how serious the bank is about fighting inflation. They noted that the variety of tools used has also increased.
Analysts stated that the MPC text shows that the CBRT is determined to use the necessary tool when necessary and that this determination is also reflected in asset prices.
The U.S. dollar to Turkish lira exchange rate, at 32.4170 before the decision, decreased by approximately 1.2% to 32.0230 after the interest rate decision. Euro to Turkish lira decreased by roughly 1.4% to 35.0110 from the 35.5140 level before the decision.
While the gram price of gold was traded at TL 2,301 before the central bank's interest rate decision, it decreased by 1% to TL 2,277 after the decision.
The BIST 100 index in Borsa Istanbul stabilized at 9,075 points after fluctuating after the interest rate decision. The index was hovering at 9,079 points before the decision.
On the other hand, Türkiye's five-year credit risk premium decreased by approximately 25 to 318 basis points.
Source: Newsroom
