Turkish central bank push rates up to try to save money

The inaction on interest rates in an overheated economy – Turkish inflation has reached its highest level in 15 years at 18% this month – and the apparent stubbornness of Erdogan, who pushed the bank to lower its rates. Defying market expectations for a rise in late July, the central bank has maintained its key rate at 17.75%. Inflation at that time was 15.4%, already more than three times the 5% target set by the bank.

A series of central bank meetings in recent months and a cabinet reshuffle, where Berat Albayrak, Erdogan's son-in-law, has been appointed finance minister, has not reassured investors, every rate hike falling.

The pound hit a record high of $ 7.24 to the dollar on Aug. 13, after Trump demanded a price increase in response to the continued detention of US pastor Andrew Brunson, whom he accuses of being involved in the attempt coup in Turkey. Last August, a dollar bought 3.5 lire; throughout the last month he has been sold over 6.

Two hours before the bank's decision, the Turkish leader toppled the currency to 3%, shaking the markets by criticizing the central bank for its inflation targets and reiterating its theory that interest rate increases are causing price rises of price. Conventional economic theory argues the opposite, namely that higher rates are used to curb inflation. Erdogan then insisted that the bank was independent and would make its own decisions.