In a bid to rescue the tumbling Turkish lira, the country’s central bank has made a massive hike in all its key interest rates.
The surprise move came after an emergency midnight policy meeting on Tuesday.
Immediately after the bank raise the overnight lending rate was raised to 12 percent the lira strengthened against the dollar, but by late afternoon most the effect had evaporated.
The decision comes despite opposition from Prime Minister Tayyip Erdogan who says he wants to maintain economic growth ahead of elections in two months.
The lira has been under pressure due in part to continuing political instability connected to a corruption scandal as well as and the global impact of a cut in US monetary stimulus.
Finmin says credibility preserved
Turkish Finance Minister Mehmet Simsek played down the impact on growth of a sharp hike in interest rates, saying the economy would have suffered greater damage from a loss of faith in the central bank.
“If we don’t preserve credibility, growth would lose ground on a much bigger scale, it would weaken much more rapidly,” Simsek told Turkish broadcaster NTV when asked about the midnight rate hike announcement.
“There has been a rapid comeback in the exchange rate, which is an indicator of regaining credibility,” he said.