The price of Turkish banks, as well as the currency of the Ottoman country against the main currencies, responded with strong rises to the decision of the Central Bank of Turkey to suddenly raise the reference interest rate by 750 basis points, up to the 25%, the highest since 2004. It is the third consecutive rise in rates that has tripled in a matter of two months from 8.5% in May.
In this way, the BIST index for the banking sector of the Istanbul Stock Exchange registered a rise of 7.53% facing the last section of the session, after having risen almost 10%.
Among the components of the Istanbul bank selective, the increases of Garanti, a subsidiary of BBVA, stood out, with an advance of more than 8% in the day, while Yapi Kredi rose almost 7.79%; Akbank, 7.66%; and Turkiye Is Bankasi, 6.49%. Also, in the foreign exchange market, the Turkish currency strengthened against the dollar, which was exchanged for 25,284 liras, its lowest exchange rate since June.
The Monetary Policy Committee of the Central Bank of Turkey, led by Governor Hafize Gaye Erkan, decided on Thursday to raise the reference interest rate from 17.5% to 25%, its highest level since 2004, according to communicated the institution.
“The Committee decided to continue the monetary adjustment process in order to establish the disinflationary course as soon as possible, anchor inflation expectations and control the deterioration of price behavior,” the entity explained.
In this way, the Turkish central bank has assured that it will determine the level of the reference interest rate in such a way that it creates the necessary monetary and financial conditions to ensure a decrease in the underlying trend of inflation and achieve the inflation target of 5%. . in the medium term.
To this end, it has warned that the monetary adjustment “will be strengthened as much as necessary”, in a timely and gradual manner, until a significant improvement in the inflation outlook is achieved.
Last July, Turkey’s year-on-year inflation rate stood at 47.83%, compared with 38.21% in June, thus ending a sequence of eight consecutive declines in the price index and substantially moving away from the medium-term stability target of 5%.
Since Hafize Gaye Erkan took office as Governor of the Central Bank of Turkey last June, the institution has undertaken a radical turn towards orthodoxy in its monetary policy with three consecutive rate hikes that have raised the price of money in 1,650 basis points, from 8.50% before the appointment to the current 25%.
