Interest Rate Decision
On Thursday, Turkey’s central bank opted to keep its key interest rate steady at 45%, refraining from further rate hikes despite a significant surge in consumer prices, which escalated by nearly 65% in January. This decision marked the first interest rate announcement under the leadership of the newly appointed governor, Fatih Karahan.
Policy Continuation
The central bank’s decision aligned with market expectations, reflecting the bank’s stance that the current level of monetary tightness, established to curb inflation, has been achieved. The bank emphasized its commitment to maintaining the current rate until a substantial and sustained decline in monthly inflation becomes evident.
Leadership Transition
Fatih Karahan assumed the role of central bank governor on February 3, succeeding Hafize Gaye Erkan, who resigned amidst allegations of nepotism reported in local media. Erkan, the first woman to hold the position, vehemently denied these allegations. During Erkan’s tenure, the central bank aggressively raised the benchmark interest rate from 8.5% in June to 45% last month, aiming to address the currency crisis and soaring cost of living that ensued from unconventional policies.
Persistent Inflation Challenges
Despite the series of rate hikes, inflation in Turkey remains persistently high, with consumer prices surging by nearly 65% in January alone. The Turkish lira has also continued its downward trajectory, reaching a new record low against the dollar this week. In response, the central bank, under Karahan’s leadership, reiterates its commitment to combating rampant inflation, supported by Finance Minister Mehmet Simsek.
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