Overview

• Turkey's central bank unexpectedly raised its key interest rate by 350 basis points to 46%, reversing a recent easing cycle.
• Overnight lending and borrowing rates were also increased to 49% and 44.5%, respectively, to tighten monetary conditions further.
• The move follows market instability after the March arrest of Istanbul Mayor Ekrem Imamoglu, which caused the lira to hit a record low of 42.
• The lira has since strengthened slightly to 38.10 to the U.S. dollar, though economists predict a weaker currency will drive higher inflation in the coming months.
• The central bank warned of additional tightening if inflation risks persist, as global economic pressures from the U.S.-China trade war amplify challenges.