Central Banks

Turkey's central bank says 'strong' hike should lower inflation

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Pedestrians pass a giant Turkish national flag hanging above a DenizBank AS bank branch in Istanbul, Turkey, on Tuesday, July 19, 2016. Turkey's central bank slowed the pace of interest rate cuts at its meeting on Tuesday after the failed coup attempt triggered a sell-off in the currency and sovereign debt. 
Ismail Ferdous | Bloomberg | Getty Images

The Turkish central bank said on Thursday it strongly tightened policy to contain inflation "as soon as possible" as it hiked its benchmark rate by 200 basis points to 17%, a bit more than expected.

The bank adopted "a strong monetary tightening in order to eliminate risks to the inflation outlook, contain inflation expectations and restore the disinflation process as soon as possible," the policy committee said in a statement after its second meeting under Governor Naci Agbal, who was appointed last month.

Policy tightness "will be decisively sustained until strong indicators point to a permanent fall in inflation in line with the targets and to price stability," it added.

Turkish inflation jumped to 14% last month from 12% and the lira remains near a record low after shedding nearly 23% this year, its second worst year on record after 2018 when a currency crisis hit.

Agbal pledged last week to keep monetary policy tight in 2021 and he kept the door open to more rate hikes after a 475-point rise last month.