The Turkish Central Bank on Thursday raised its key rate for the seventh consecutive month, to 42.5%, in line with market expectations and showing signs of slowing down the monetary tightening process.
The Bank raised its rate by two and a half points compared to last month and explained, in a press release, that the monetary tightening is close to the level required to establish the course of disinflation and that it has thus reduced the pace of this last.
It plans to complete the tightening cycle as soon as possible. Monetary tightening will be maintained as long as necessary to ensure lasting price stability, she added.
Since the May elections and the reappointment of President Erdogan to power, the new team at the head of the Central Bank and the Minister of the Economy has raised the key rate from 8.5 to 42.5% in an attempt to reduce the rate. inflation which reached nearly 62% last month, according to official statistics.
Although high, the official figures are disputed by independent economists from the Inflation Research Group (Enag), who calculate the rise in consumer prices at 129.27% year-on-year in November.
Mr. Erdogan had long argued, against orthodox theories, that high interest rates were the cause of inflation, before changing course after his re-election and appointing a new team of respected economists to do so. get Turkey out of the crisis which is seriously altering the daily lives of Turks.
Since the elections, the Central Bank has done a good job of setting expectations and delivering on them. It was clear that rate increases would soon start to slow down, said Cagri Kutman, an analyst specializing in the Turkish market at KNG Securities.
However, this certainly won’t be the last rate hike of this cycle. There is still much to be done to bring inflation under control, but the market is optimistic that Turkey is on the right track, he adds.