ISTANBUL: Turkey’s central bank on Thursday delivered a huge surprise by increasing the interest rate to 25%.
The hike of 7.5 percentage points follows an increase to 17.5% from 15 % last month.
Most economists had expected the central bank to increase its policy rate Thursday to 20%.
The central bank said that recent indicators showed a continued increase in the underlying trend of inflation, AFP reported.
It said that monetary tightening would be further strengthened as much as required in a timely and gradual way until a considerable improvement in the inflation outlook is achieved.
Turkish currency
The lira gained 1.5% against the dollar in the wake of the central bank’s strong signal that it was intensifying its fight against inflation and attempts to support the beleaguered currency.
Liam Peach, Capital Economics analyst, said the much larger-than-expected rate hike would go a long way towards reassuring investors that the shift back to policy orthodoxy is on track.
