In a surprise move, the Central Bank of Turkey (CBT) increased its benchmark interest rate by 350 basis points to 46% on Thursday, April 17, 2025. This decision marks a sharp contrast to the three consecutive rate cuts implemented since December 2024.
The Monetary Policy Committee, led by Governor Yasar Fatih Karahan, also raised the overnight lending rate to 49% and the overnight borrowing rate to 44.5%. The bank stated that this tightening of monetary policy aims to strengthen disinflation by moderating domestic demand, supporting real appreciation of the Turkish Lira, and improving inflation expectations.
The decision comes amidst growing economic concerns and political turmoil, including the recent arrest of Istanbul Mayor Ekrem Imamoglu. Some analysts believe the rate hike was also influenced by ongoing reserve losses since late March. The central bank has stated that the tight monetary stance will be maintained until price stability is achieved through a sustained decline in inflation.