Turkey hikes interest rates for first time in 27 months

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The Central Bank of Turkey today held its first Monetary Policy Committee (MPC) meeting under the leadership of Hafize Gaye Erkan, who assumed the position after the May elections.

During the meeting chaired by Erkan, the MPC made a significant move by increasing interest rates after a span of 27 months. The one-week repo auction interest rate was raised by 650 basis points, climbing from 8.50% to 15%.

This decision marks the Central Bank's first interest rate hike since March 2021 when Naci Ağbal was in charge. Ağbal was subsequently removed from his position, and Şahap Kavcıoğlu was appointed as his replacement. Kavcıoğlu had previously reduced the interest rate from 19% to 8.50%.

The latest MPC meeting demonstrates a shift in the bank's approach under Erkan's leadership. The decision to raise interest rates aims to address the current economic challenges and maintain stability in the financial markets.

Monetary policies had been determined based on President Recep Tayyip Erdoğan's "low interest-low inflation" thesis for a long time before the elections.

After his re-election, Erdoğan appointed Mehmet Şimşek, known for advocating orthodox economic policies, as the Minister of Treasury and Finance. Upon assuming the role, Şimşek stated in his speech that "we have no choice but to return to rational policies." (HA/VK)