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Turkey’s central bank raised its key interest rate by 3.5 percentage points on Thursday, bringing the benchmark one-week repo rate to 46%, as the country grapples with persistent inflation, rising political tensions and the ripple effects of global tariffs, The Associated Press reported.
The rate hike marks the end of a three-month easing cycle and signals renewed efforts to rein in inflation, which has remained high despite earlier attempts at monetary tightening, the report said, adding that the Monetary Policy Committee also raised the overnight lending rate to 49% and the borrowing rate to 44.5%.
In its official statement, the committee reportedly said the “tight monetary policy stance will be maintained until a permanent decrease in inflation and price stability are achieved.”
While inflation showed some moderation in March, the central bank warned of renewed pressures in the coming weeks. According to the report, the committee noted that “the main trend in inflation declined in March” and added that “core goods inflation is likely to rise slightly in April due to developments in financial markets”.
The decision comes amid heightened political uncertainty following the recent arrest of Istanbul Mayor Ekrem İmamoğlu — a key opposition figure — and as Turkey navigates volatile global conditions, including trade disruptions driven by retaliatory tariffs.
The bank expressed concern that such global developments could slow progress toward stabilizing prices. Growing protectionism in global trade, it reportedly said, could undercut Turkey’s disinflation path by affecting commodity prices and capital flows.
Turkey’s battle with inflation has roots in a mix of internal and external challenges — from the aftermath of the COVID-19 pandemic to surging energy prices, the report said while suggesting that another major factor has been President Recep Tayyip Erdoğan’s reported belief that high interest rates cause inflation.
In a notable policy pivot in 2023, Erdoğan appointed a new economic team that initiated a cycle of interest rate hikes aimed at restoring credibility and fighting inflation.
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