Turkey lifts interest rate as lira starts to improve

Turkey’s central bank has raised its key interest rate sharply from 17.75 per cent to 24 per cent to contain inflation and stem the currency crisis that has been destabilising the country this summer.

The bank’s move yesterday was long overdue, many independent economists say, and suggests it is re-asserting its independence after president Recep Tayyip Erdogan repeatedly and publicly pushed it to keep rates low.

The Turkish lira began to recover shortly after the rate hike, strengthening by 3.4 per cent to 6.18 per cent against the American dollar. The currency has plunged in recent months and even after yesterday’s rise was down almost 39 per cent against the dollar this year.

Investors are mainly concerned about Mr Erdogan’s economic policies and an ongoing diplomatic and trade dispute with the United States over the detention of an American pastor.

Washington has doubled tariffs on steel and aluminium imports from Turkey.