The Turkish lira is dropping to new lows again

Turkish lira sinks to fresh lows following the central bank’s interest rate hike

The Turkish lira
sank to new record lows after Turkey’s central bank raised the country’s benchmark interest rate by 650 basis points in a dramatic monetary policy reversal.

The central bank lifted its key interest rate by almost double, from 8.5% to 15% Thursday, marking the country’s first hike since March 2021. However, that was still below Reuters’ expectations of a hike to 21%.

The lira — which has been extending its plunge since President Recep Tayyip Erdogan’s reelection — was last trading at 24.97 against the greenback.

″ is tanking big time and probably will continue to do so as they attempt to play catch up,” said Steve Hanke, professor of applied economics at Johns Hopkins University, adding that the central bank decision is “a little bit behind the curve.”

Newly appointed Governor Hafize Gaye Erkan hinted at more hikes until the inflation situation in the country improves.

“Monetary tightening will be further strengthened as much as needed in a timely and gradual manner until a significant improvement in the inflation outlook is achieved,” Erkan said in a statement Thursday.

According to government statistics, the country’s annual inflation rate for May stood at 39.59%. Last October saw Turkey’s inflation rate soar to 85.51%.