Turkey's Central Bank Raises Rates to 40%, Signals Peak of Hiking Cycle Near

By Ed Frankl

Turkey's central bank on Thursday raised its key interest rate for the sixth consecutive time, but said the pace of its monetary tightening will slow as the course of inflation in the country eases.

The central bank raised the country's benchmark interest rate, the one-week repo rate, to 40% from 35%.

The rise compared with expectations of 37.5%, according to a consensus of economists polled by FactSet.

The bank said the current level of monetary tightness--it has been steeply lifting rates since June this year--is close to the level required to establish a course that will lead to easing inflation.

"Accordingly, the pace of monetary tightening will slow down and the tightening cycle will be completed in a short period of time," it said.

Turkish inflation eased a little in October to 61.3% from 61.5% in September, having continued to rise through the summer.

"Recent indicators suggest that domestic demand has started to moderate as the monetary tightening is reflected on financial conditions," it said.

Still, it said the existing level of domestic demand, the stickiness in services inflation, and geopolitical risks keep inflation pressures alive.

An end to the hiking cycle would conclude what analysts have seen as a return to more orthodox monetary policy under Governor Hafize Gaye Erkan--a former executive at Goldman Sachs--who was picked after the re-election of President Recep Tayyip Erdogan earlier this year.

Write to Ed Frankl at [e-mail]

(END) Dow Jones Newswires

11-23-23 0631ET