Turkey’s central bank raises interest rate to 50% despite previous hints of end-to-hike cycle

Turkey’s central bank on Thursday raised its key interest rate, the one-week repo rate, from 45% to 50%, citing the continuing need to counter climbing inflation in the country.

“In February, led by services inflation, the underlying trend of monthly inflation was higher than expected,” the bank’s Monetary Policy Committee said in a statement following the decision. It noted that imports of consumption goods and gold slowed, which improved Turkey’s current account balance, but that domestic demand remaining “resilient.”

“Stickiness in services inflation, inflation expectations, geopolitical risks, and food prices keep inflation pressures alive,” the statement said. “The Committee closely monitors the alignment of inflation expectations and pricing behavior with projections, and the impact of wage increases on inflation.”

Turkish annual consumer price inflation soared to 67% in February, fueling concerns that Turkey’s central bank — which had indicated a month prior that its painful eight-month-long rate-hiking cycle was over — might have to return to tightening.

The Monetary Policy Committee made it clear that it would not shy away from further hikes if these are needed to keep its inflation targets on track.

Source: CNBC