But the bank signaled that the rate hikes — which have recently pushed loan prices from 8. 5% to 42. 5% — were likely to come to an end soon.
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“The committee plans to complete the adjustment cycle as soon as possible,” he said. “Monetary tightening will be maintained as long as sustainable value stability is ensured. “
The series of rate hikes came after President Recep Tayyip Erdoğan — a longtime proponent of an unorthodox policy of cutting rates to fight inflation — reversed course and appointed a new economic team following his reelection in May.
The team includes Mehmet Simsek, a former Merrill Lynch banker who returned to finance minister until 2018, and Hafize Gaye Erkan, a former U. S. -based bank executive who took over as central bank governor in June. .
A currency store is pictured in Istanbul, Turkey, Thursday, Dec. 21, 2023. (AP Photo/Khalil Hamra)
Before that, Erdoğan fired central bank governors who resisted his rate-cutting policy, which economists said ran counter to classical economic thinking, sent rates soaring and triggered a currency crisis.
In contrast, central banks around the world raised interest rates rapidly to target spikes in consumer prices tied to the rebound from the COVID-19 pandemic and then Russia’s war in Ukraine.
“There is much still to be done in taming inflation but the bond market is optimistic that Turkey is on the right track,” said Cagri Kutman, Turkish market specialist at KNG Securities. “Turkish bonds have been amongst the strongest performing out of major economies over the past month.”
Bartosz Sawicki, market analyst at Conotoxia fintech, said that the central bank was likely to complete its rate hikes next month at 45%.
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“Therefore, (the central bank) will finish tightening its policies before the local elections in March,” he wrote in an email.