World’s third highest interest rates in Turkey
The Turkish central bank’s large interest rates hike on Thursday have propelled the country past Venezuela to claim third place in the countries with the highest interest rates in the world.
The 625-basis point hike was higher than expected for Turkey, given President Recep Tayyip Erdoğan’s well-known dislike for interest rates.
It brought Turkey’s rates up to 24 per cent, 3-and-a-half per cent higher than Venezuela’s. Only Suriname, at 25 percent, and Argentina, where rates have gone up to a whopping 60 per cent, are currently ahead of Turkey on the list.
The central bank announced the increase during a long-awaited meeting on Thursday, held shortly after a speech during which Erdoğan described interest rates as “a tool of exploitation.”
This rhetoric was nothing new for the Turkish president, a self-declared “enemy of interest rates” who called them “the mother of all evil” and has speculated that shadowy “interest rate lobbies” have sought to destabilise Turkey.
It was an interview with Bloomberg in May, during the run-up to the June elections, that set off a period of serious weakness in the Turkish lira. Erdoğan contradicted orthodox economic theory to declare that interest rates were the cause of inflation, and said he would take a firmer grasp of the country’s economic policy after being voted in as Turkey’s first executive president.
Commentators have blamed Erdoğan’s invective against interest rates for a series of previous instances when the central bank failed to make expected hikes in the face of rising inflation and a plunging lira.