On Thursday, Turkey has increased its interest rates to 24 percent.
President Recep Tayyip Erdogan has promised to keep interest rates, low in his country. With lira being on a long-time low, he had to curb pressure from all sides to keep interest rates down. He even earned the name “enemy of interest rates” for this cause.
But the Central Banks of Turkey has taken stern steps in the other direction.
The lira has gone down by 40 percent against the US dollar, for this year alone. Similarly, the interest rates are at 18 percent currently, which is a 15-year high. This has led the Turkish Central Banks to increase interest rates.
Argentina has a lead over all countries in terms of high-interest rates. Next comes Turkey and then comes Venezuela, according to the Spectator Index.
With external debt on the increase, the rate hike would help to pay back debts. The US dollar is growing in strength and other countries are facing a deep crisis in their currency values.
The Lira rose by 2 percent on this hike in interest rates. Bonds saw a gain, with interest rates rising. The Lira saw a high of 6.0030 on the announcement.
The hike in interest rates makes it 24 percent which is an increase of 625 percent. Earlier it was 17.75 percent.
The Central Bank has said that monetary tightening will be undertaken if there is a further slide in the economy.
Assets have been witnessing a huge sell-off on investor fears. With a diplomatic war going on between Turkey and Washington, the markets are witnessing a jolt in their trading.
However, analysts across the world call this “a right decision”. Adam Posen, an economist from America, calls this hike a “the most hopeful thing for Turkey”.
The erratic movement in the lira has been moving the global markets with wide fluctuations.