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Turkish central bank raises key interest rate

 The Turkish central bank has raised its key interest rate by 250 basis points to 45 percent, in line with market expectations.

The central bank’s monetary policy committee said in a statement that the level of monetary tightening required to establish disinflation has been reached.

“Taking into account the lagged impact of monetary tightening, the committee assesses that the monetary tightness required to establish the disinflation course is achieved and that this level will be maintained as long as needed,” the statement said.

According to the statement, the committee assessed that the current policy rate level will be maintained until there is a significant decline in the underlying trend of monthly inflation and until inflation expectations converge to the forecast range.

The committee will reassess the stance of the monetary policy if notable and persistent risks to the inflation outlook emerge, it added.

The central bank embarked on a tightening cycle after Turkish President Recep Tayyip Erdogan appointed former bankers Hafize Gaye Erkan as central bank governor and Mehmet Simsek as the head of the Treasury and Finance Ministry in June last year. Both bankers were considered market-friendly figures.

The central bank aggressively raised interest rates from 8.5 percent to 42.5 percent in June-December last year to tame persistent inflation.

Yet, last December’s figures showed that the Turkish annual inflation still stood above 64 percent, driven by the government’s tax increase, rising reconstruction costs after last February’s deadly earthquakes, and other factors. ■

Famagusta Gazette