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The Central Bank of the Republic of Turkey’s (CBRT) decision to increase the policy interest rate to 50%, higher than expectations, led to a decrease in the dollar.

In its announcement today, the CBRT declared that it raised the interest rate to 50% from 45%, a decision exceeding expectations. The CBRT had kept the policy interest rate stable for the past month following a change in the previous management. The new management’s second decision was a 500 basis point increase.

Interest rates had been rapidly reduced to 8.5% in the past, but with the recent decisions over the last 10 months, the rate has reached 50%.

It was stated that the policy interest rate will be determined to provide monetary and financial conditions that will bring down the main trend of inflation and reach the inflation target of 5% in the medium term.

The press release regarding the CBRT interest rates included the following statement:

The Monetary Policy Committee has decided to increase the policy rate, being the one-week repo auction interest rate, from 45% to 50%. The Committee has also decided to make changes in the operational framework and set the Central Bank’s overnight borrowing and lending rates at a margin of +/- 300 basis points from the one-week repo auction interest rate.

The press release also indicated, “Other indicators for the near future point to a resilient trend in domestic demand.”

Prior to the announcement, the USD/TRY pair, which was at 33.08 levels, fell to 32.83 after the announcement.

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