Economists React to Central Bank’s Surprise Rate Hike
The Central Bank of the Republic of Turkey (CBRT) surprised the markets by raising the policy interest rate from 42.5% to 46%, contrary to expectations of keeping it unchanged.
Here’s what leading economists had to say:
“The Right Decision” – Mahfi Eğilmez
- Mahfi Eğilmez, a prominent Turkish economist, described the move as a “correct decision”, stating:
“The CBRT widened the interest rate corridor by raising the overnight borrowing rate to 44.5% and the lending rate to 49%. As I had suggested, it also raised the policy rate (weekly repo rate) to 46%. A right decision.”
“Inflation Needs to Fall Sharper” – Timothy Ash
- Timothy Ash, emerging markets strategist, commented:
“A tough but correct decision, especially given the decline in FX reserves. This pre-emptive tightening gives the CBRT room to cut more aggressively later if inflation drops more sharply.”
“Positive for Financial Markets” – Dr. Burcu Aydın
- Dr. Burcu Aydın pointed to risks and reserves:
“With this hike, the CBRT shows it is willing to use interest rate tools alongside reserves in response to increased risks post-March 19. This step could ease pressure on reserves and positively impact financial markets. Its most significant effect may be lowering year-end inflation expectations.”
“A Step in the Right Direction” – Gizem Öztok Altınsaç (TÜSİAD Chief Economist)
- Gizem Öztok Altınsaç supported the move:
“The 350 bps rate hike from the CBRT is a step in the right direction. The policy rate is now 46%, and the upper band of the interest rate corridor is at 49%.”
In summary: Most economists welcomed the move as a necessary tightening step to control inflation, stabilize markets, and support the Turkish lira and reserves.
