Turkish central bank increases key interest rate again: What does that mean for the financial markets?

The Turkish central bank has increased the key interest rate again, this time by 2.5 percentage points to 42.5 percent. The bank said it would end the “cycle” of interest rate hikes as soon as possible, but will maintain a tight monetary policy until price stability is ensured. The official inflation rate in Turkey peaked at 85 percent in October last year and is currently at almost 62 percent. Observers blame the financial policy of President Recep Tayyip Erdoğan, who has long resisted higher interest rates and further fueled inflation with expensive election gifts.

The impact on the market and the financial industry

Turkey's central bank's interest rate hike suggests it remains committed to controlling inflation. In the long term, this could lead to a stabilization of the economy and the financial market in Turkey. At the same time, however, high interest rates could also slow down lending and investment activity in the country, which could lead to a slowdown in economic growth.

International investors could be attracted by the higher interest rates as they can expect a better return on their investments in Turkey. On the other hand, high inflation and tight monetary policy could lead to a decline in confidence in the Turkish lira, which could lead to a devaluation of the currency.

source

According to a report by www.zeit.de