The Turkish lira is rallying after its central bank hiked rates to 17.75%


The Turkish lira rose against the dollar Thursday after the country’s central bank hiked rates more than expected to 17.75%.

The lira was up more than 2% against the greenback at 8:15 a.m. ET as Turkey’s central bank raised its policy rate 125 basis points. Economists had predicted a rise between 50 and 100 basis points, according to Reuters.

The policy meeting comes after data showed consumer prices hit a six-month high in May, rising more than 12%.

Jason Tuvey, an emerging markets economist at Capital Economics, said the move is a tentative sign that the central bank could be shifting its focus from shoring up the lira to tackling inflation.

“That said, we think that it’s too early to say that there has been a fundamental shift in policymakers’ commitment to bringing down inflation,” Tuvey said. “Moreover, there’s been no firm commitment from the government to tighten fiscal policy.”

Officials hiked rates 300 basis points at an emergency policy meeting last month as the lira hit a record low of 4.9233 per dollar.

The selloff came as Turkish President Recep Tayyip Erdogan told Bloomberg TV that if he wins an election scheduled for later this month, he will step up his role in shaping economic policy. The comment raised concerns about how much influence Erdogan, a self-declared “enemy” of interest rates, will have on the country’s central bank.

The lira is down nearly 18% versus the dollar this year.

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