The decision was made during the bank's Monetary Policy Committee Meeting on June 22 when it raised its main interest rate by 650 basis points to 15%.

“Considering the inflation outlook and the upside risks, the Committee assessed that the current monetary policy was far from achieving the inflation target of 5%. The Committee underlined that the deterioration in price stability was threatening macroeconomic stability and financial stability in particular. Accordingly, the Committee decided to implement a monetary tightening process, the steps of which will be strengthened as much as needed in a timely and gradual manner,” the bank said, adding that the monetary tightening process will continue until a significant improvement in the inflation outlook is achieved.

The policy rate was increased from 8.5% to 15% during the first policy meeting led by the new Central Bank Governor, Hafize Gaye Erkan. The bank noted that “the committee sees this decision as the first step of the monetary tightening process that was initiated to establish the disinflation course as soon as possible, to anchor inflation expectations, and to control the deterioration in pricing behavior.”

In May, annual inflation in Turkey stood just below 40%, having reached a 24-year high of over 85% in October of the previous year. The bank's committee evaluated that the current monetary policy framework is insufficient in achieving the inflation target, considering the prevailing inflation outlook and the risks that exist. (ILKHA)