Turkey's central bank is tightening monetary policy to curb inflation. It has ordered banks to place portions of their lira reserves in blocked accounts, increasing loan rates and reducing loan limits. Some banks have stopped lending or recalled loans, leading to a liquidity squeeze. The move comes despite the bank's previous indication that its rate-hiking cycle was over, but rising inflation and falling reserves have prompted a reassessment.
Turkey's inflation rate has soared to an alarming 67%, driven by rising costs in hospitality, health, education, and transportation. The surge in inflation has raised concerns about further interest rate hikes, despite earlier assurances to the contrary, and has put pressure on the lira. Food prices have also skyrocketed, exacerbating the financial strain on Turkish households. While experts predict inflation will decline in the long term, policymakers face pressure to address the issue before local elections.
