Turkish Lira Plummets Despite Interest Rate Hike

The Turkish lira hit a record low against the US dollar after the central bank hiked interest rates by 650 basis points to 15% in an effort to tame inflation. The rate hike represents a policy reversal from last year when President Erdogan pressured the central bank to cut interest rates despite soaring inflation. While the increase is a step in the right direction, economists had expected a higher rate spike to combat inflation, which hit a two-decade high of 85.5% in October. The central bank hinted that more tightening is likely until a significant improvement in the inflation outlook is achieved.