ALBAWABA - In response to mounting inflationary pressures, the Central Bank of the Republic of Turkey (CBRT) announced a significant hike in its policy rate, raising it by 500 basis points to 50%.
Following the decision, the dollar/Turkish lira exchange rate, which stood at 32.4170, experienced a notable decline to 32.0230, representing a 1.2% decrease.
The CBRT also made adjustments to its operational framework, widening the margin for overnight borrowing and lending rates in comparison to the one-week repo auction interest rate by +/- 300 basis points. Previously, this margin was +/- 150 basis points.
Analysts interpret these actions as a clear indication of the CBRT's commitment to combatting inflation, emphasizing the institution's willingness to implement additional tightening measures if deemed necessary.
The move underscores the CBRT's proactive stance in managing inflationary pressures, as it seeks to stabilize the economy and restore investor confidence.
In response to the interest rate decision, the euro/Turkish lira exchange rate also experienced a decline of approximately 1.4%, dropping from 35.5140 to 35.0110.
Moreover, the gram price of gold saw a 1% decrease, falling from 2,301 Turkish lira to 2,277 Turkish lira, following the CBRT's announcement.
On the Borsa Istanbul, the BIST 100 index showed signs of stabilization, settling at 9,075.00 points after experiencing fluctuations in response to the interest rate decision.
Additionally, Turkey's 5-year credit default swap (CDS) rate decreased by approximately 25 basis points to 318 basis points, signaling improved investor sentiment towards the country's economic outlook.
