The Central Bank of the Republic of Turkey (CBRT) on Thursday revised up its key policy rate from 8.25% to 10.25%, contradicting the market expectations as it said that a fast recovery from the initial coronavirus pandemic shock sent inflation higher than expected, prompting it to hike interest rates by 200 basis points after nearly a year of aggressive rate cuts.
Following its Monetary Policy Committee (MPC) meeting, the CBRT said in a statement that despite the fact that the partial recovery signs in the global economy occurred in the third quarter with normalization measures, uncertainties still linger due to the course of the pandemic.
The gradual normalization steps and strong credit acceleration pointed out an important recovery in the third quarter, it said, and the monetary and fiscal measures implemented to limit the effects of the pandemic on the Turkish economy provided the financial stability and ability to bounce back in economic activity by supporting production potential.
There has even been a slight recovery in tourism revenues thanks to the lifting of the travel bans, the statement added.
It continued that policy rate was increased by 200 basis points to restore the disinflation process and support price stability.