Turkey hikes main interest rate to 17%

Turkey’s central bank on Thursday hiked its main interest rate to 17 per cent in what economists greeted as a sign that the financially troubled country was embracing monetary orthodoxy once again.
The decision means that Turkey’s policy rate has shot up by 6.75 percentage points in just a month – a stark contrast to many countries’ decisions to bring borrowing costs down to help revive economies badly hit by the coronavirus pandemic.
The sharp move higher follows two years in which it was held steady or lowered due to President Recep Tayyip Erdogan’s unconventional belief that higher rates cause inflation.

That policy saw the Turkish lira lose roughly a third of its value against the dollar as the central bank burned through its reserves in an effort to prop up the currency.
The accompanying rise in the annual inflation rate to above 10 per cent forced Erdogan to reshuffle his economic team and appoint market-friendly former finance minister Naci Agbal as central bank chief last month.

The lira managed to claw back about 10 per cent against the dollar after the change on market expectations that traditional monetary policy was returning to Turkey.
“Today’s meeting will...