Photo: Reuters/Umit Bektas
Photo: Reuters/Umit Bektas

Amid the continued plunge in the Turkish lira, the country’s central bank raised interest rates after an emergency meeting on Wednesday, sending the currency shooting up against the US dollar.

The late liquidity window rate, one of the primary lending rates, was raised from 13.5% to 16.5%, after which the lira recouped losses on the day of more than 5%. The unit had reached another historic low earlier in the day, at 4.92 per dollar.

The lira’s recent decline accelerated this week, after comments from Turkish President Recep Tayyip Erdogan, echoing statements he has made previously, that interest rates should be lower and that he would take a proactive role in influencing central bank policy.

“Current elevated levels of inflation and inflation expectations continue to pose risks on the pricing behavior,” the central bank said in a statement posted to its website on Wednesday. “Accordingly, the [Monetary Policy] Committee decided to implement a strong monetary tightening to support price stability.

“The Central Bank will continue to use all available instruments in pursuit of the price stability objective. Tight stance in monetary policy will be maintained decisively until inflation outlook displays a significant improvement.”

While the move has reversed losses in recent days, the struggling Turkish currency remains down around 17% from its value versus the dollar at the end of last year.