Central Bank hikes key interest rate to 17 pct

The Turkish Central Bank on Dec. 24 announced an interest rate hike of two percentage points, above market expectations.

The bank's policy rate - also known as the one-week repo rate - rose to 17 percent, up from 15 percent, the bank said in a statement.

The median forecast by 21 economists surveyed by Anadolu Agency on Dec. 18 was a rise of 150 base points. Some economists also predicted a 150-point rise in a Reuters poll.

The bank again pledged to "decisively" keep policy tight to permanently lower inflation, which stood at 14 percent last month and has been above target for years.

Following the move, the Turkish Lira appreciated some 1 percent against the U.S. dollar, with the dollar/Turkish lira rate falling to 7.57 from over 7.61.

Pointing to the partial recovery in global economic activity since the third quarter, the bank underlined that uncertainties prevail due to the recent increase in COVID-19 cases.

It stated that recent restrictions to curb the virus' spread create uncertainties in the short-run outlook of economic activity, particularly the services sector, despite national income data and indicators for the last quarter pointing to a strong course.

"Domestic demand conditions, cumulative cost effects, in particular the exchange rate effects, increasing international food and other commodity prices, and deterioration in inflation expectations continue to affect the pricing behavior and inflation outlook adversely," the statement said.

Sustained monetary tightening

It stressed that strong monetary tightening will be implemented to eliminate risks to the inflation outlook, contain inflation expectations, and restore the disinflation process as soon as possible.

"In...