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Turkey just hiked its interest rate 625 basis points to 24%, the most in 15 years, to save its currency

Turkey’s central bank raised its benchmark interest rate by the most since Recep Tayyip Erdogan came to power 15 years ago, countering the president’s call for lower borrowing costs just two hours before the decision was announced. The currency rallied.

The Monetary Policy Committee led by Governor Murat Cetinkaya on Thursday increased the one-week repo rate by 625 basis points to 24 per cent, more than the median estimate in a Bloomberg survey that called for a hike of 325 basis points.

The bank’s decision came shortly after Erdogan triggered tumult by repeating his hostility to higher borrowing costs and issuing an order that limited the use of foreign currency in domestic transactions. The independence of monetary policy has been in doubt since Erdogan pledged in his election campaign this year to take on a greater role to bring interest rates lower.

“Great decision — made all the more difficult by the huge pressure on the central bank from Erdogan,” said Bluebay Asset Management LLC strategist Tim Ash. “The Turks just gave themselves a chance to hold the lira and rebuild the trust of the market.”