Turkey's Central Bank hikes interest rates to contain the fall in Turkish lira
In a move to contain the depreciation of Turkish lira against the U.S. dollar, Turkey's Central Bank raised its benchmark one-week repo rate by 50 basis points from 7.5 percent to eight percent at the Monetary Policy Committee's meeting yesterday, Daily Sabah reports.
In the meantime, the upper band of the interest rate corridor (marginal funding rate) was also increased by 25 basis points to 8.50 percent. The lower upper band of the interest rate corridor remained unchanged at 7.25 percent.
The U.S. dollar fell to 3.37 against the Turkish lira after the Turkish Central Bank's (CBRT) decision, which saw another historic high at 3.42 earlier in the day. However, after the European Parliament's discussion to temporarily suspend Turkey's EU accession talks, the rate again jumped over the 3.44 level, reaching a new historic high. The euro also hit a new record high of 3.63.
The CBRT also decreased the foreign currency reserve requirements of banks by 50 basis points for all terms, in a move to provide the financial system with $1.5 billion of funds.