The Turkish central bank has sharply raised key interest rates on Thursday 13 September in order to curb inflation. The interest rate hike ignores a call from President Recep Tayyip Erdogan. That reports Business Insider.
Erdogan had increased pressure on the central bank just hours before announcing the interest rate decision. He actually wanted interest rates to be lowered. The bank clearly did not listen to this, because the central bank increased the interest rate from 17,75% to 24%. That is considerably higher than most economists expected, because they expected an increase of up to 21%.
The decision has caused the lira to rise. The euro fell by about 3% against the Turkish lira. On Thursday afternoon you received 7,14 lira for €1, while on Thursday morning it was still 7,40 lira.
Inflation targets
Erdogang accused the central bankers that the set targets remain out of sight, despite previous interest rate increases. The increase in consumer prices (inflation) amounted to 17,9% in August.
The Turkish president also has an unorthodox theory. He expects interest rate increases to lead to rapid price increases, while bankers and economists generally assume the opposite. Interest rate increases are therefore normally applied to curb increases in inflation.
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