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City landscape at the sunset on March 4, 2024 in Istanbul, Turkey.
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Turkey’s Central Bank surprised the markets on Thursday, when it raised its key interest rate, a one-week ransom rate with 42.5% to 46%, graduating from the weakening cycle that began in December last year.
The decision comes to the opposite economic violation from the tariffs on the US and Main political flight and investor After the arrest of the mayor Istanbul and the opposition leader, Imomoglu screens in March.
“The determination to the tough monetary position is to strengthen the disinfectant process through the moderation of domestic demand, the real assessment of the Turkish lyre and the improvement of inflation expectations,” writes the Turkish monetary policy in a statement accompanied by its decision.
The Committee led “the potential consequences of the growth of protectionism in the world trade for the process of disinfection through global economic activity, prices and capital flows” and stated that “dense monetary position will be maintained until the stability of prices is achieved through a sustainable decrease in inflation.”
Annual inflation in Turkey amounted to 38.1%in March.
The raising of the rate comes before significant exhaustion of foreign currency, since the Central Bank of Turkey spent as much as $ 25 billion three days after Imomaglu’s arrest and as a result of the March 19 protests to protect the lyre, which briefly overcame the record number of $ 40. Turkish markets initially plunged into the news of the arrest, and the country’s government banned short sales and quiet ransom rules on March 23, trying to strengthen the stock.
On March 20, Drop Lira pushed the Central Bank to make an emergency hike for 200 bass, which brought its lending rate overnight to 46.00%, which is at the top of the interest rate.
Thus, on Thursday, raising the interest rate is largely technical adjustment after the March events, according to Brad Bechtel, the FX global leader in Jefferies.
“We will see what (Turkish President Recep) Erdogan is to say about the steps of the Central Bank, but so far the Central Bank has done a pretty good job, moving political noise in its further fight against inflation,” Bechtel wrote after the bank announced on Thursday.
The Central Bank’s move “will formalize the tightening that provides last month, and believes that politicians have become more concerned about inflation,” wrote Nicholas Farr on Thursday, which arises by economists at ECAPITAL Economics.
The statement of the monetary committee “emphasized the risk of the weaker lyre, and that politicians would closely monitor the flows of capital amid the current uncertainty around American trade protectionism,” Farri writes.
Economy capital analysts estimate inflation in Turkey in the coming months of the reduced trajectory and do not see further strengthening in the store.
“But this is understandable,” added in the note, “that the cycle of the weakening of the Central Bank has reached a large checkpoint, and it may take some time before the restoring cycle of relaxation. Now we predict one week to complete the year by 40.00% (earlier 35.00%).”
