Turkey has increased its key interest rate by a whopping 475 basis points to 15% in a bid to tame inflation and boost the lira.
The change on November 19, came during the first rate-setting meeting chaired by the country’s new central bank governor, Naci Agbal. Mr Agbal was appointed earlier in November as part of wider shake-up of the country’s economic leadership, which also saw the country’s finance minister (and president Recep Tayyip Erdogan’s son-in-law) Berat Albayrak stepping down, citing family and health reasons.
The lira had been suffering a period of record lows in recent months, but following the rate increase has been rallying. The move has widely been interpreted as Mr Agbal being given a mandate to stabilise the economy and return to a more orthodox policy approach.
This has also been a turbulent time for Turkey’s banks. Pre-tax profits at all five of Turkey’s largest banks fell between 2017 and 2019, alongside key measures of profitability such as return on equity. Recent data from the country’s banking watchdog has been more promising, however, showing increased profits year-on-year in recent months.
