Turkey: New Rate Hike to Curb Inflation

Fighting inflation is the most important challenge facing the Turkish economy in 2023. Last month, Turkish President Recep Tayyip Erdogan replaced the head of the central bank, appointing new manager Gaye Erkan, the first woman in this position. And Erkan’s policy is to return the country to more “normal” monetary management, which during the high-inflation period means raising interest rates. However, the government has previously insisted that the monetary authorities keep rates low in an attempt to stimulate the economy despite double-digit price increases.

Rates have been revised upwards for two consecutive months. In particular, over the past few hours, they have grown from 15 to 17.5%, and in June – from 8.5 to 15%. However, many analysts believe that this measure is still insufficient to contain the rise of prices and the weakness of the Turkish lira. The national currency has lost 30% of its value against the dollar this year and hit an all-time low this week: 26.9 liras per dollar.