July 27, 2021


AfricaTopForum – News Around Africa

Turkish central bank raises interest rates to 15 percent

2 min read

Turkey’s central bank increased its benchmark interest rate to 15 percent. The lira gained against the dollar.

Monetary policymakers hiked borrowing costs from 10.25 percent, the central bank said in a statement on Thursday. All funding to banks will be carried out at the benchmark rate, the central bank said, ending a policy of setting policy via a so-called interest rate corridor.

Investors in Turkey have bet on a substantial hike to Turkish interest rates after President Recep Tayyip Erdoğan, a vocal opponent of higher borrowing costs, sacked and replaced the central bank’s governor on Nov. 7. Erdoğan said last week that the central bank had his backing to do battle against inflation, which reached 11.9 percent in October.

But Erdoğan said on Wednesday that high interest rates were costly and deterred investment and employment, raising questions about the size of any rate hike.

“The lagged effects of depreciation in Turkish lira, increasing international food prices and deterioration in inflation expectations affect the inflation outlook adversely,” the central bank said. “Accordingly, the Committee has decided to implement a transparent and strong monetary tightening.”


The central bank’s decision matched the median estimate of economists surveyed by Reuters, Bloomberg and the state-run Anadolu news agency.

The lira rose by 1.1 percent to 7.6169 per dollar.

The Turkish lira has rallied from an all-time low after Erdoğan hired Naci Ağbal, a respected technocrat and former finance minister, as central bank governor. It had hit a record low of 8.58 per dollar on Nov. 6, then gained by as much as 12 percent to the strongest level since late September ahead of Thursday’s decision.

“Excellent decision from Ağbal – at last Turkey has a proper central banker,” said Tim Ash, senior emerging markets strategist at BlueBay Asset Management in London.

The lira has also rallied after the resignation of Berat Albayrak, Erdoğan’s son-in-law, as treasury and finance minister on Nov. 8. Erdoğan replaced Albayrak two days later with former deputy prime minister Lütfi Elvan.