ISTANBUL, Sept 13 (Reuters) - Turkey’s central bank raised its benchmark rate by 625 basis points on Thursday in a move that boosted the lira and may ease investor concern about President Tayyip Erdogan’s influence on monetary policy.
The bank raised the one-week repo rate to 24 percent, meaning it has now increased interest rates by 11.25 percentage points since late April, in an attempt to put a floor under the tumbling lira.
The decision came despite Erdogan repeating his opposition to high interest rates earlier in the day, saying high inflation was a result of the central bank’s wrong steps.
All 11 economists in a Reuters poll forecast the bank would tighten, but with the rate hike predictions ranging between 225-725 basis points as the bank balances concerns over lira weakness with worries about an economic slowdown.
The lira firmed to 6.01 against the dollar following the decision, from more than 6.4176 beforehand.
The currency has lost 40 percent of its value against the dollar this year, hit by concerns about Erdogan’s influence on monetary policy and more recently by a diplomatic spat between Turkey and the United States.
Erdogan, a self-described “enemy of interest rates”, assumed new powers under an executive presidential system following an election in June and has appointed his son-in-law as finance minister.
The appointment of Berat Albayrak has boosted expectations the president - who wants to see lowering borrowing costs to spur credit growth and new construction - will look to exercise greater influence over monetary policy.
In August, annual consumer price inflation hit 17.9 percent, its highest level since late 2003, prompting the central bank to say it would adjust its monetary stance at the September meeting in the face of “significant risks” to price stability. (Reporting by Daren Butler; Editing by Dominic Evans)