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Turkiye's central bank raises interest rate to 17.5 pct

Xinhua | Updated: 2023-07-20 22:10

This photo taken on July 20, 2023 shows a view of Turkish central bank in Ankara, Turkiye. [Photo/Xinhua]

ANKARA -- Turkiye's central bank on Thursday raised its benchmark interest rate by 250 basis points to 17.5 percent from 15 percent in a move against high inflation and currency fluctuations.

The central bank "decided to continue the monetary tightening process to establish the disinflation course as soon as possible, to anchor inflation expectations, and to control the deterioration in pricing behavior," the institution's monetary policy committee said in a statement.

To improve market mechanisms and stability, the committee will gradually "simplify and improve the existing micro- and macroprudential framework" and pledges quantitative and credit tightening to support the rate hike, it added.

The hike came nearly a month after the Turkish central bank hiked its main rate by 650 basis points to 15 percent on June 22 in a policy turnaround toward monetary tightening to counter high inflation.

Turkish President Recep Tayyip Erdogan had previously advocated low-interest rate policies, believing they would help curb inflation. However, the Turkish lira has experienced a significant decline of over 60 percent in value against the U.S. dollar in the past two years.

To address the economic problems, Erdogan appointed former U.S.-based bank executive Hafize Gaye Erkan as the central bank governor, and Mehmet Simsek, a well-known former banker, as the treasury and finance minister, signaling a return to more orthodox policies.

Turks have long been suffering from the high cost of living, driven by soaring inflation, which hit a 24-year high of 85.5 percent in October last year before falling to 38.2 percent in June.

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