Turkish Central Bank Hikes Key Rate to 46% Amid Economic Strain

Turkey's central bank surprised markets by raising its key interest rate by 350 basis points to 46%, reversing its recent easing cycle. The decision comes amid ongoing inflation risks, rising domestic demand, and recent market volatility triggered by political turmoil, including the arrest of Istanbul's mayor. The central bank also increased overnight borrowing and lending rates, signaling a more hawkish stance to stabilize the lira and address inflation expectations. Policymakers cited concerns over the impact of global trade protectionism and pledged to maintain a tight monetary policy until price stability is achieved. The Turkish lira slightly strengthened following the announcement, while the central bank emphasized it would adjust policy further if inflation risks persist. This move contrasted with market expectations of a rate hold and followed three consecutive rate cuts earlier in the year.