Turkish Central Bank Raises Key Rate By 500 Bps To 40%

(RTTNews) - Turkey's central bank announced a further massive hike in the key interest rate on Thursday with the aim of ensuring a decline in the underlying trend of inflation and return 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 Governor Hafize Gaye Erkan, decided to hike the policy rate from 35.0 percent to 40.0 percent.

"The Committee assessed that the current level of monetary tightness is significantly close to the level required to establish the disinflation course," the bank said in a statement.

The CBRT bank signaled that the pace of monetary tightening will slow down after the tightening cycle is complete.

At its previous meeting in October, the MPC raised the interest rate the same by 500 basis points.

This followed a similar 500 basis-point hike in September and a 750 basis-point increase in August.

"The monetary tightness will be maintained as long as needed to ensure sustained price stability," the bank said.

Recent official data showed that the country's consumer price inflation remained very high in October, despite easing slightly from 61.5 percent to 61.4 percent.

Inflation is still elevated and well above the target range of the central bank.

In addition to policy rate decisions, the CBRT said it will continue to make quantitative tightening decisions to support the monetary policy stance.

In order to achieve the medium-term inflation target of 5 percent, the MPC will determine policy decisions in a way that creates the necessary monetary and financial conditions, the bank said in a statement.