Taksim Square in Turkey, featuring the Turkish flag in the background and the image of the country's first president, Kemal Ataturk.
KEY POINTS- The main interest rate was raised to 40% by Turkey's central bank on Thursday. In the wake of the announcement, the lira was slightly stronger against the dollar, trading at 28.766 to the dollar.
- The rate increase was twice as high as anticipated by economists, who had predicted a hike of 250 basis points.
- According to Timothy Ash, an emerging markets strategist at BlueBay Asset Management, "really impressive move by the [Central Bank of the Republic of Turkey] - probing their orthodoxy and getting well ahead of expectations," in a note.
The benchmark one-week repo rate, which is Turkey's main interest rate, was raised by 500 basis points to 40% by the central bank on Thursday.
The increase exceeded the projections of economists, who had predicted an increase of 250 basis points.
The action was perceived as the bank's ongoing effort to counteract rising inflation and the declining value of the lira.
the Turkish lira. In October, the country's inflation rate reached an astounding 61%.
The lira was slightly stronger against the US dollar, trading at 28.766 to the dollar after the news.
Among the few analysts who anticipated a 500 basis point increase was Timothy Ash, strategist for emerging markets at BlueBay Asset Management.
"The Central Bank of the Republic of Turkey made a really impressive move by probing their orthodoxy and getting well ahead of expectations," the man wrote in a note.
He continued, "These guys and girls are serious about fighting inflation." "They deserve recognition for that,"
Following a string of painful interest rate hikes for Turks, the central bank made its decision in an attempt to reverse years of sharply rising inflation and a sharply depreciating currency, which were largely caused by the Ankara government's obstinately loose monetary policy.
The lira has lost more than 80% of its value against the US dollar in the last five years, and it is down 35% against the dollar year to date.