Investing.com - The Turkish lira rallied on Thursday after the country’s central bank raised interest rates much more than expected.
The Central Bank of Turkey increased the one-week repo rate by 625 basis points to 24%, more than analyst expectations for a hike of 425 basis points to 22%.
The bank’s decision was announced hours after Erdogan triggered tumult by repeating his hostility to higher borrowing costs and issuing an order that limited the use of foreign currency in domestic transactions.
The lira rose after the decision and was trading 2.9% higher at 6.1586 per dollar at 7:20AM ET (1020GMT).
The rate hike came alongside a pledge by the bank to enact strong monetary tightening in order to support price stability.
"If needed, further monetary tightening will be delivered," the bank said in a statement.
The lira has lost around 40% in value against the dollar since the start of the year, thanks to investor fears over the central bank's independence and a diplomatic and trade fight between Turkish President Recep Erdogan and Washington.