The Turkish Central Bank (TCMB) has recently raised its key interest rate rather unexpectedly by 200 bp to 10.25%. The move was explicitly justified by the risks to the inflation outlook and the need to keep inflation expectations in check. The guardians of the currency had long been reluctant to take this step in the form of an increase in the official key interest rate, thus completing a move away from „more restrictive monetary policy through the back door“, which had been overdue for weeks. By mid-August at the latest, the central bank had arranged the supply of liquidity in such a way that commercial banks were forced into more expensive refinancing facilities. In this way, the guardians of the currency were able to increase the average refinancing costs of the financial institutions and thus provide a restrictive impulse to the Turkish money markets. At the same time, however,…
