The Turkish central bank has increased the official interest rate from 45 to 50 percent, Handelsblatt reports. This is the central bank's response to persistently high inflation in Turkey. In February, consumer prices rose 67 percent compared to the same month a year earlier.

The Turkish central bank explains its measure as follows: “The tight monetary policy stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed.”

Holidays in Türkiye are becoming more expensive

Prices for hotel accommodation and food have recently increased especially sharply. However, economists expect the inflation rate to slow to 42.7 percent by the end of the year.

At the beginning of February, the president of the Turkish central bank, Hafize Gaye Erkan, resigned. He had already aggressively raised interest rates in the summer of 2023. His successor, Fatih Karahan, kept the key interest rate unchanged for a long time. He has now changed course.

Local elections are just around the corner

Karahan's decision comes amid preparations for next week's national local elections. President Recep Tayyip Erdoğan's AKP party is trying to recapture major cities like Istanbul. After the elections, more restrictive financial policies are expected, which could affect many Turks economically.

The rise in interest rates strengthens the lira

Meanwhile, the increase in interest rates had a positive effect on the Turkish currency. The loss of value of the lira is one of the reasons for high inflation in Turkey. Last year alone the lira lost 40 percent of its value against the dollar, CNBC reports. According to the Handelsblatt newspaper, the main Turkish stock index rose by 1.6 percent.

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