Turkey Hikes Key Rate to 50% as Prices Surge

By Joshua Kirby

Turkey's central bank unexpectedly lifted its benchmark interest rate to 50.00% as inflation continues to run higher than targeted.

The bank decided at its policy meeting Thursday to raise the one-week repo rate by five points from 45.00%, and said it would lift rates further if necessary. Economists expected the bank to keep the rate where it was, according to a poll compiled by FactSet.

"Tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed," the policy committee said. "Monetary policy stance will be tightened in case a significant and persistent deterioration in inflation is foreseen."

The rate hike stands in stark contrast to the monetary easing that some other central banks have begun to enact as inflation cools to manageable levels. The Czech and Brazilian central banks cut their key rates this week, followed closely by the Swiss National Bank, the first among wealthy developed nations as a postpandemic surge in inflation draws to an end.

Turkish consumer prices by contrast continue to surge dramatically. Inflation picked up pace again last month to 67%, fueled by consumer demand, especially in the services sector. The central bank currently forecasts inflation to drop to 36% by the end of the year and to 14% a year later, but economists suggest that these targets may prove challenging without further tightening of the country's monetary flows.

Write to Joshua Kirby at [e-mail]; @joshualeokirby

(END) Dow Jones Newswires

03-21-24 0730ET