Foreign exchange rates sharply react to Central Bank’s interest rate hike

In the Istanbul free market, the dollar started the day at 27.2200 Turkish liras, while the Euro began at 29.5930 Turkish liras. Following the Central Bank’s decision to raise interest rates by 750 basis points, the dollar dropped to 25.2840 Turkish liras, and the Euro retreated to 27.3816 Turkish liras. The Central Bank’s decision to increase the interest rate was three times higher than the expected 250 basis points.

Foreign exchange rates decreased following the decision by the Central Bank of the Republic of Turkey (CBRT) to raise the policy rate.

The CBRT announced an interest rate decision that exceeded expectations. The CBRT increased the policy rate by 750 basis points to reach 25 percent. As a result, interest rates reached their highest level in four years.

After the decision, the dollar, which began the day at 27.2200 Turkish liras in the Istanbul free market, fell to 25.2840 Turkish liras.

The Euro, which started the day at 29.5930 Turkish liras, also declined to 27.3816.

Yesterday, the selling price of the dollar was 27.2110 Turkish liras, and the selling price of the Euro was 29.4910 Turkish liras.

HIGHER-THAN-EXPECTED INCREASE

The Central Bank increased the policy rate beyond expectations. Economists participating in AA Finans’ expectation survey had predicted that the CBRT policy rate would be raised by 250 basis points to 20 percent. The Bloomberg HT survey had also forecasted an increase in the policy rate to 20 percent.

When the new administration took office at the CBRT, the policy rate was at 8.50 percent.