Turkey's Central Bank Raises Interest Rate to 46% Amid Political Turmoil

Turkey's central bank unexpectedly raised its key interest rate to 46%, reversing a recent cycle of rate cuts, in response to persistent inflation and significant market turmoil triggered by the arrest of Istanbul Mayor Ekrem Imamoglu. Imamoglu's detention, widely seen as politically motivated, led to widespread protests, a sharp depreciation of the Turkish lira, and the rapid depletion of the country's foreign currency reserves as authorities intervened to stabilize the market. The move marks a return to monetary tightening after a period of easing, with officials citing inflationary pressures and global economic uncertainties as driving factors. Although inflation had recently eased to its lowest level in nearly two years, economists warn that the lira's recent volatility may push inflation higher in the coming months. The central bank also raised its overnight lending rate and tightened funding conditions, signaling a more aggressive stance to restore market confidence. These developments underscore the intersection of political unrest and economic policy in Turkey, with the central bank acting to mitigate risks amid ongoing instability.