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Central Bank of Turkey to release interest rate decision

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Central Bank of Turkey to release interest rate decision

Turkish central bank
Photo: Adem Altan/ AFP

The Central Bank of Turkey will today release its interest rate decision.

The bank will likely maintain 17% interest rates. Seeking to rein in double-digit inflation, President Recep Tayyip Erdogan took drastic steps in November that saw his son-in-law, Berat Albayrak, removed as finance minister and the respected Naci Agbal appointed as the bank’s president. Agbal has undertaken hawkish monetary policy that has yielded positive results so far.

In an attempt to gain voter confidence, Erdogan and the ruling Adalet ve Kalkinma Partisi (AKP) will seek to bolster Turkey’s economy by attracting foreign investors and keeping interest rates steady until the upcoming presidential elections. Worried about the growing popularity of opposition parties, Erdogan likely hopes to counter opposition promises and ease the political dissatisfaction among Turkey’s working class citizens by avoiding further deterioration of the Turkish lira. With high-interest rates likely to persist, expect the lira to continue to make gains against the US dollar in the short- to medium-term. Despite the lira’s significant appreciation, nationwide inflation has persisted above expectations. The government is likely to respond by applying wage and price controls, which could result in recession and heightened unemployment in the short-term.

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