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Turkish central bank hikes rates, signals end to tightening measures.

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TLDR:

The Turkish central bank has raised its one-week repo auction rate from 42.5% to 45%, but hinted that its tightening cycle may be over. This comes as Turkey’s year-on-year inflation rose to 64.8% in December.

The Central Bank of the Republic of Turkey’s (CBRT) monetary policy committee has hinted that it may have ended its tightening cycle after raising the one-week repo auction rate from 42.5% to 45%. However, real interest rates are still negative in Turkey as the country’s year-on-year inflation rose to 64.8% in December. The CBRT’s decision to raise rates further comes after media outlets criticized the central bank for not doing enough to combat inflation.

The Turkish central bank’s decision to raise interest rates again reflects its attempts to control inflation, which has soared to 64.8% in December. The bank has been under pressure to tighten monetary policy, and it appears that it is responding to these concerns by raising rates. However, the bank’s decision to signal that it may have completed its tightening cycle suggests that it is satisfied with the current level of monetary tightening in the country.

This move by the Turkish central bank may have significant implications for the country’s economy. While the decision to raise rates may help to control inflation in the short term, it could also lead to a slowdown in economic growth. Higher interest rates can make it more expensive for businesses and consumers to borrow money, which can reduce spending and investment. This can have a negative impact on economic activity and could potentially lead to a recession.

It’s important to note that while the Turkish central bank has raised interest rates, real interest rates in the country are still negative. This means that the current level of interest rates is not sufficient to keep pace with inflation, which remains high at 64.8%. This suggests that the central bank may need to take further action in the future to bring inflation under control.

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