Turkey shocks world markets as Central Bank raises interest rates

The Turkish Lira has sharply risen and seems to be on its way to stabilising after the Central Bank of Turkey raised interest rates yesterday, defying the orders of President Recep Tayyip Erdogan.

The country’s central bank raised interest rates from 17.75 per cent to 24 per cent, implementing the first major change in the rates since April in order to stabilise and strengthen the Turkish currency against the US dollar.

The decision to increase the rates was in direct opposition to Erdogan, who has been described as an “enemy of interest rates”. In attempts to reverse the effects on the economy, Erdogan urged Turks to trade in other currencies such as the dollar and euro for the Turkish Lira.

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The central bank, political opposition, and Western economists have been urging Erdogan and his government to take action since the Lira plummeted by 40 per cent in August. The president, however, argued that it was not the low interest rates that were responsible for the economic downturn and high inflation rates, but it was a result of the bank’s incorrect steps.

Erdogan also warned that the US is waging a global economic war and Turkey is one of its main targets. His claims come as the US threatens sanctions on Ankara after increasing taxes on Turkish products.