Raising interest rates in Türkiye: The Turkish Central Bank challenged the country’s rising inflation by raising its key interest rate to 40%, This is a major measure that comes within the framework of intensive efforts to confront high inflation in the country. Although the new interest rate was much higher than expectations, However, the Turkish Central Bank indicated that interest rates are approaching the level required to begin reducing inflation.
Türkiye has witnessed economic problems during the recent period as a result of rapid inflation. Although it, The Turkish President recently allowed interest rates to rise. This comes after President Recep Tayyip Erdogan opposed raising interest rates. Considering this a way to increase inflation. With his re-election in May, His attitudes changed, Which allowed the central bank to raise interest rates to 40%.
The impact of raising the interest rate on the Turkish economy:
Although Türkiye‘s economy grew significantly in the first years of Erdogan’s presidency, However, it has faced major challenges in recent years. Previous central bank policy that included lowering interest rates despite high inflation, It led to a currency crisis in 2021.
High inflation rate in Türkiye:
The inflation rate has reached which measures the rate of price increase, to 61.36% in October, It is expected to continue to rise and is expected to reach its peak next May at about 70 to 75%. While central banks around the world raised interest rates to combat rising prices, The former President of Türkiye was opposed to this measure.
The role of the Turkish Central Bank in fighting inflation:
Under the leadership of its new president, Hafiz Guy Erkan, She is a former Wall Street banker, The central bank received permission to raise interest rates to increase the cost of borrowing and slow the rise in prices. The bank stressed that the pace of monetary tightening will slow down and the tightening cycle will be completed in a short time.
Frequently Asked Questions:
1. How much will the interest rate be raised in Türkiye?
The prime rate has been raised to 40%.
2. Does the Turkish Central Bank expect to reduce inflation after this measure?
Yes, The central bank indicated that the interest level is close to the level required to start reducing inflation.
3. Was there an impact on the main economy of Türkiye?
Yes, Previously, Türkiye found economic difficulties, Especially due to previous interest policies and high inflation.
Briefly, Raising interest rates in Türkiye represents an important step to confront accelerating inflation and stimulate economic stability in the country.
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