Turkey's Central Bank Raises Key Rate Unexpectedly To 50.0%

(RTTNews) - Turkey's central bank announced a further hike in the key interest rate unexpectedly on Thursday with the aim of ensuring a decline in the underlying inflation and returning it to the 5 percent target in the medium term.

The Monetary Policy Committee of the Central Bank of the Republic of Turkey, or CBRT, headed by the newly elected Governor Yasar Fatih Karahan, decided to hike the policy rate from 45.0 percent to 50.0 percent.

Economists were looking for a pause in the hiking cycle.

The central bank said a tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed and inflation expectations converge to the projected forecast range.

Recent data showed that Turkey's consumer price inflation climbed to a 15-month high of 67.07 percent in February from 64.86 percent in January. That was far above the target of 5.0 percent.

The monetary policy stance will be tightened in case a significant and persistent deterioration in inflation is foreseen, the bank said.

The MPC reiterated that a tight monetary stance will bring down the underlying trend of monthly inflation through moderation in domestic demand, real appreciation in the Turkish lira, improvement in inflation expectations, and disinflation in the second half of 2024.