The Turkish central bank has sharply increased interest rates in the country. The primary interest rate went from 10.25 percent to 15 percent.
Shortly after the announcement, the Turkish currency gained significantly in value. The lira had fallen sharply in recent months.
The interest rate hike was the first real achievement of the recently appointed bank governor Naci Agbal. An increase in interest rates was widely taken into account in the financial markets. This is because Agbal promised to pursue a transparent and supportive policy.
The fact that Agbal is raising interest rates seems to suggest that Turkish President Recep Tayyip Erdogan agrees to a different approach to protect the lira and curb inflation. Earlier, the president said that higher interest rates were the reason for the strong inflation, which goes against the most common theories.
Agbal got a complicated financing structure from his predecessor Murat Uysal on his plate. Under his regime, measures were announced to bolster the value of the currency, but Uysal previously opted to leave interest rates untouched.
According to experts, a strong signal from the new central bank president was necessary. Especially since it has been restless in Turkey for some time.
In addition to the problems with the lira and high inflation, the country also has to contend with diminishing reserves of foreign exchange.