Turkey stuns market with massive interest rate hike

Erdogan appoints himself chairman of Turkey's sovereign wealth fund

But on Thursday, the Turkish Central Bank did just that.

Turkey's central bank on Thursday surprised markets with a bigger than expected rate hike to battle soaring inflation and boost the lira, prompting the embattled currency to surge in value.

Economists have argued the nominally independent bank has come under pressure from Erdogan who, only a couple of hours before its decision, launched a blistering attack on the bank and interest rates.

Despite the comments, Erdogan added: "There has been no change in my sensitivities on the issue of interest rates".

Since then, he has continued to dismiss calls to raise rates to address Turkey's longtime woes with its currency, the lira.

"It nearly seems like it's a game of "good cop, bad cop" being played out between the Turkish authorities - with President Erdogan on the one hand still making statements regarding his dislike of interest rates and. a very sizeable reaction from the central bank in response to the recent inflationary and geopolitical developments", she said.

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The lira had lost 40 percent of its value against the dollar this year, hit by concerns about monetary policy and, more recently, a diplomatic spat between Turkey and the United States. Late last month, South America's second-largest economy saw that rate jump to a staggering 60 percent in a bid to ease investor fears. "Every business in this country needs to be priced, discussed and carried out with our own currency".

"The crucial thing is to restore the confidence of worldwide investors that their policies are on the right track", global economist Eswar Prasad said earlier this month.

The rate rise comes on the same day as the Bank of England left the interest rate untouched at 0.75%, citing heightened risks to global growth as a result of volatility within emerging markets, as well as tensions between the USA and China.

On Thursday, the Turkish Central Bank exercised that independence - and appeared to reassure investors in the process. The lira's value leaped on news of the decision.

One of Erdogan's advisors mainly known for his outlandish statements, Yigit Bulut, was removed from the board, while new members included Rifat Hisarciklioglu, the president of the Union of Chambers and Commodity Exchanges of Turkey (TOBB). The leader placed his son-in-law as head of the finance ministry and in a separate move has attempted to take control of the country's sovereign wealth fund.

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