Turkey central bank raises rates for the first time since 2021 in U-turn.


The Central Bank of Turkey raised interest rates to 15%, from 8.5%. This pushed borrowing costs to their highest levels since late 2021. This is a stark turnaround of policy from President Tayyip Edogan's unorthodox economic policies, which saw rate cuts in the face of higher inflation.

In effect, the new economic administration of Hafize Gaye Erkan as the head of Turkey's central bank, and Mehmet Simsek as the new Treasury and Finance Minister have embarked on a dramatic U-turn of recent policy. This is the first rate hike since March 2021.

Previous policy saw Turkey lowering its policy rate from 19% in late 2021 to 8.5% in March 2023. This, despite the fact that inflations was running rampant. Conventional economic theory suggests the opposite - that rates should be hiked to cool ballooning inflation. As a result, the Turkish lira has plummeted, losing about 80% of its value to the dollar over a five-year period.

It is noteworthy that despite the hefty 6.5% rate increase, this was still lower than forecast. The market was expecting a 12.5% increase to 21%. As a result, the market was somewhat disappointed and the USDTRY spiked upwards (blue arrow), with the lira losing more ground to the greenback.

Trade the News: View our Economic Calendar

Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.

${getInstrumentData.name} / ${getInstrumentData.ticker} /

Exchange: ${getInstrumentData.exchange}

${getInstrumentData.bid} ${getInstrumentData.divCcy} ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%) ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%)

${getInstrumentData.oneYearLow} 52/wk Range ${getInstrumentData.oneYearHigh}

Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.

Past Performance: Past Performance is not an indicator of future results.

Spreads Widget: When static spreads are displayed, the figures reflect a time-stamped snapshot as of when the market closes. Spreads are variable and are subject to delay. Single Share prices are subject to a 15 minute delay. The spread figures are for informational purposes only. FXCM is not liable for errors, omissions or delays, or for actions relying on this information.