The value of the Turkish lira has soared after central bank of the country defied President and increased the interest rates.
Earlier today, the currency had dropped to 6.54 per dollar. However, it rose to 6.06 per dollar after the monetary policy committee of the bank decided to raise the interest rates from 17.75 percent to 24 percent even though Erdogan has vowed to keep them steady — or even lower them.
The move of the central bank makes the interest rate of Turkey one of the highest across the globe.
Erdogan, the President of Turkey, had called for the interest rates to be lowered hours before the release of the crucial decision in an attempt to influence the bank.
Last week, the bank pledged to take action after the inflation in the country increased to 18 percent and the speculation heightened that it would increase the interest rates.
An analyst at Capital Index, Kathleen Brooks, said that it was a “powerful signal” that the central bank continued to be independent.
She stated: “The central bank has decided that higher rates are justified, even with a slowing economy and potential for a recession, and that halting the currency ‘s slide is of primary importance to the Turkish economy at this juncture.”
Brooks added: “Due to the high level of foreign-denominated debt in Turkey, this is a sensible plan.
She continued: “However, we need to see investors reactions over the next few days and weeks to see if this is enough to stop the capital slide out of Turkey and if the lira can sustain a recovery over the long term.”
Fidelity International’s Paul Greer stated: “Today’s rate hike will help Turkey regain some credibility in the eyes of investors, but it remains to be seen if debt market access re-opens for the country.