Türkiye's Central Bank Shocks with 25% Interest Hike

Türkiye’s central bank raised its key interest rate by an aggressive 7.5 percentage points on Thursday, a larger-than-expected boost that offers a new sign of a return to more traditional economic policies under President Recep Tayyip Erdogan.

The bank hiked its policy rate to 25% as it continues to backtrack from a rate-cutting course set by Erdogan, which has been blamed for inflaming a cost-of-living crisis. Many households have been left struggling to afford rent and basic goods as inflation has surged, said The Associated Press.

The increase “will go a long way towards reassuring investors that the shift back to policy orthodoxy is on track,” London-based Capital Economics research firm wrote in an analyst note.

It called the move a surprise as most analysts expected a much smaller bump in borrowing costs.