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Turkey’s central bank resorted to another sharp rate hike on Thursday, in a bid to bring inflation down from double-digits and maintain price stability.

The Monetary Policy Committee of the Central Bank of the Republic of Turkey governed by Naci Agbal decided to lift the key one-week repo rate sharply to 17.00 percent from 15.00 percent.

The bank had raised the rate by 475 basis points at the first MPC meeting of Agbal as governor in November.

Early November, President Recep Tayyip Erdogan replaced TCMB Governor Murat Uysal with former finance minister Agbal after the Turkish lira fell to a record low this year.

“In the forthcoming period, tightness of monetary policy stance will be decisively sustained until strong indicators point to a permanent fall in inflation in line with the targets and to price stability, the bank said in a statement.

The committee said domestic demand conditions, the exchange rate effects, rising global food and other commodity prices and the weakness in inflation expectations continue to affect the pricing behavior and inflation outlook adversely.

In November, inflation rose to a 15-month high of 14.0 percent from 11.9 percent in October.

After taking into account the end-2021 forecast target, the MPC decided to implement a strong monetary tightening, in order to eliminate risks to the inflation outlook, contain inflation expectations and restore the disinflation process as soon as possible.

Today’s meeting will provide further reassurance to investors that the shift to orthodoxy is here to stay, Jason Tuvey, an economist at Capital Economics, said.

The CBRT has probably now done enough and the one-week repo rate is expected to be kept at 17.00 percent for at least the next six months or so, the economist added.


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