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interest rate decision

Last month, the markets were taken completely by surprise when the CBRT raised interest rates by two percentage points.

That 200 basis point increase, in comparison to other central banks, is the equivalent of four ‘raises’.

The move was shocking not only because of its size but also because it went against the direction virtually every other central bank was taking.

Also, most analysts thought that the CBRT had had the majority of its independence eroded by the government. They had assumed the government wanted to keep interest rates low to boost the economy.

But, the situation in Turkey is a little more complicated.

The country is running the risk of further sanctions both from the EU and the US over geopolitical disputes. But if we focus only on the economic numbers, Turkey’s monetary policy can’t be judged within normal parameters.

In 2018, Turkey had the second-highest effective policy rate in the world at 24%. It subsequently cut that by a whopping 1,200 ...

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