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Turkey’s Central Bank raises benchmark interest rates by 50 basis points

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TURKISH CENTRAL BANK

Turkey’s Central Bank raised its benchmark interest rate by 50 basis points on Nov. 24 in an unexpected move, ordering the first increase in nearly three years, as a skyrocketing U.S. dollar and domestic worries continue to batter the Turkish Lira. Defying top officials’ repeated calls for cheaper credit, the bank increased the one-week repo rate to 8 percent and lifted its overnight lending rate from 8.25 to 8.5 percent. “The slowdown in aggregate demand contributes to the fall in inflation. However, exchange rate movements due to recently heightened global uncertainty and volatility pose upside risks on the inflation outlook,” said the bank in a written statement on its website.

“The committee decided to implement monetary tightening to contain the adverse impact of these developments on expectations and the pricing behavior,” it said.

The bank kept its overnight borrowing rate at 7.25 percent. It also noted that future monetary policy decisions would be conditional on the inflation outlook.

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