People carry goods in Eminonu trade neighbourhood in Istanbul, Turkey, Wednesday, March 20, 2024. Turkey's central bank raised its key interest rate by 5 percentage points on Thursday, resuming a policy of rate hikes aimed at combating soaring inflation that is causing households severe economic pain.
“Tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed,” the bank said. President Recep Tayyip Erdogan is a long-time proponent of an unorthodox economic policy of slashing interest to tame inflation — a theory that runs contrary to conventional economic thinking. A series of rate cuts by the central bank spurred double-digit inflation and a currency crisis until Erdogan reversed course following his re-election in May and appointed a new economic team.
“Although the end of the tightening cycle was declared in January, the Turkish central bank was forced to lift the one-week repo rate from 45% to 50% despite local elections looming,” Bartosz Sawicki, a market analyst at Conotoxia, wrote in an emailed note.