Cityscupe at sunset on March 4, 2024 in Istanbul, Turkey.
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The Central Bank of Turkey surprised the markets on Thursday, when it raised a key interest rate, weekly redemption rate, from 42.5% to 46%, ending the mitigation cycle, which he started in December last year.
The decision appears on economic interference due to US tariffs and Main unlimited political and investor After the arrest of the Mayor in Istanbul and the opposition leader of the Imamoglu, in March.
“Decision in the scope of strict monetary attitude involves strengthening the disinflation process by moderation in domestic demand, true recognition in Turkish lira and improving the expectations of inflation,” he wrote in Turkey's statement in a statement accompanying her decision.
The committee quoted “the potential effects of growing protectionism in global trade on the process of disinflation through global economic activity, prices of goods and capital flows”, and said that “the strict cash attitude would be maintained until the price stability was achieved through a permanent decrease in inflation.”
Annual inflation in Turkey reached 38.1% in March.
The increase in the rates appears in the face of significant exhaustion of a foreign currency, because the Turkish central bank spent $ 25 billion within three days after the arrest of imamogle and the resulting protests on March 19 to defend Lira, which briefly increased to a record level of a greater 40 to the lower American part. Turkish markets initially fell in news about the arrest, and the country's government on March 23 banned the short sales and relaxation of the rules of redemption to strengthen the shares.
On March 20, the decrease in Lira prompted the central bank to make an emergency increase of 200 rules, which brought the loan rate from 46.00%, which is the upper part of the corridor of interest rates.
According to Brad Bechtel, the global head of FX on Thursday, Thursday, raising interest rates is largely technical adaptive after March development.
“We will see what (President of the Turkish Recep) Erdogan has to say about the movements of the central bank, but so far the central bank has done a fairly good job, moving political noise in a further fight with inflation” – wrote Bechtel in a note after Thursday's announcement of the bank.
The movement of the central bank “would formalize the tightening delivered last month and suggests that decision -makers were more worried about the risk of inflation's growth,” wrote Nicholas Farr, Emerging Europe Economist at Capital Economics on Thursday.
The statement of the Monetary Committee “emphasized the risk of weaker lyre, and decision -makers strictly monitored capital flows among the current uncertainty related to commercial protectionism in the US,” wrote Farr.
Capital Economics analysts assess inflation in Turkey in the coming months and do not see further exacerbation.
“But it is clear,” the note added-“The soothing cycle of the central bank reached a serious obstacle and may take some time before the soothing cycle is launched again. We now forecast that the weekly repo rates ended at 40.00% (previously 35.00%)”.