ISTANBUL, April 25 (Reuters) - Turkey’s central bank raised the highest of the four interest rates it uses to set policy by a more-than-expected 75 basis points on Wednesday, tightening for the first time in four months after President Tayyip Erdogan called snap elections.
The bank lifted its late liquidity window rate to 13.50 percent from 12.75 percent. It left its benchmark repo rate at 8 percent.
Ten of thirteen economists in a Reuters poll had forecast an increase in the late liquidity window rate, with four predicting a rise of 50 basis points. Three economists each had foreseen hikes of 25 and 75 basis points. Another three had predicted the bank would leave the rate untouched.
Erdogan last week announced presidential and parliamentary elections on June 24, pulling the polls ahead by more than a year, saying Turkey needed to switch quickly to a new executive presidency system due to economic challenges and developments in Syria.
The central bank’s efforts to rein in double-digit inflation have been complicated by a sharp sell-off in the lira currency, which has hit a series of record lows this year. Investors have dumped the lira on widening concern about Erdogan’s drive for lower rates.
A self-described “enemy of interest rates”, Erdogan has repeatedly called for lower borrowing costs, heightening the perception that policy is not independent.
The bank also kept the overnight lending rate at 9.25 percent and the overnight borrowing rate at 7.25 percent. (Reporting by Ezgi Erkoyun; Editing by David Dolan )