The Central Bank of Türkiye on Thursday raised its policy rate by 650 basis points to 15%, its first such rise in 27 months.
The one-week repo rate rose to 15% from 8.5%, the bank said in a statement following its sixth Monetary Policy Committee meeting this year and the first under the helm of Hafize Gaye Erkan, the bank's new governor.
"The Committee decided to begin the monetary tightening process in order to establish the disinflation course as soon as possible, to anchor inflation expectations, and to control the deterioration in pricing behavior," the bank said in a statement.
Ahead of Thursday's announcement, economists' expectations for the rate hike ranged widely, from 14 to as high as 40 percentage points.
The bank stressed the importance of the monetary tightening process to increase the effectiveness of monetary policy.
"Monetary tightening will be further strengthened as much as needed in a timely and gradual manner until a significant improvement in the inflation outlook is achieved," read the statement.
Falling for a seventh consecutive month in April, Türkiye's annual consumer inflation rate slowed to a 17-month low of 39.59% in May, according to the latest data.
"In addition, in order to be able to sustain price stability in the long-term, the Central Bank of the Republic of Türkiye will continue to support strategic investments that will improve the current account balance," it added.
Türkiye's current account balance posted a deficit of $5.4 billion in April, up from $4.9 billion in March.
President Recep Tayyip Erdogan revamped his financial team following his May reelection victory, bringing in prominent figures such as Mehmet Simsek, the new finance minister, and Erkan, the first woman to lead the country's central bank.
"To increase the functionality of market mechanisms and strengthen macro-financial stability, the Committee will simplify and improve the existing micro and macroprudential framework," it said, adding: "Guided by impact analyses, the simplification process will be gradual."
