Turkey Shocks Markets With 350-Point Rate Hike to Curb Volatility
Turkey’s central bank unexpectedly raised its key interest rate by 350 basis points on Thursday, bringing it to 46%. The sharp hike aims to stabilize financial markets after weeks of turbulence triggered by the arrest of Istanbul Mayor Ekrem Imamoglu.
The move also increased the overnight lending rate to 49% from 46%, following an earlier unscheduled hike last month. The overnight borrowing rate climbed to 44.5% from 41%, signaling a strong pivot toward tighter monetary policy.
The Turkish lira edged up slightly after the announcement, trading around 38.10 to the U.S. dollar. Meanwhile, the BIST 100 and the banking index saw a partial pullback from earlier gains.
The central bank warned of increased inflation pressure, stating that “monthly core goods inflation will likely rise in April due to recent financial volatility.” It also noted strong domestic demand could weaken disinflation efforts.
“Inflation expectations and pricing behavior continue to threaten disinflation,” the bank said, pledging to act further if long-term inflation risks grow.
Arrest Fallout and Currency Defense
Mayor Imamoglu’s arrest last month rocked markets, sending the lira to a record low near 42 and triggering a broad sell-off in Turkish stocks and bonds. The central bank responded by selling an estimated $50 billion in foreign reserves and purchasing 120 billion lira ($3.15 billion) in domestic bonds to stabilize the currency.
To tighten liquidity further, the bank stopped funding through its weekly repo auctions and raised overnight lending again, effectively delivering an additional 400 basis points of tightening.
Inflation Outlook and Global Risks
March inflation data showed a 38.1% annual rise, with a 2.46% increase from February—lower than analysts expected. However, economists anticipate the recent lira depreciation could push April and May inflation figures higher.
Turkey’s rate decision also came against a backdrop of global financial strain, as trade tensions between the U.S. and China continue to escalate, further complicating economic policy decisions worldwide.
Kosta Gushterov
Reporter at Coindoo
Kosta has been a part of the team since 2021 and has solidified his position with a thirst for knowledge, incredible dedication to his work and a “detective-like” mindset. He not only covers a wide range of trending topics, he also creates reviews, PR articles and educational content. His work has also been referenced by other news outlets.
