The Facts
In an unexpected move, Turkey's central bank hiked its key interest rate by 750 basis points to 25% on Thursday, with the Turkish lira jumping more than 3% against the US dollar. Ankara is attempting to address a new round of inflation with its reversal of prior economic policy.
This rate hike comes after the central bank raised the rate to 17.5% from 15% in July. Most economists had forecast the rate hike to 20%.
The Spin
Narrative A
Though the path ahead is challenging, Erdoğan's adoption of a policy to raise interest rates is a sign his government is doing its best to promote economic growth. Additionally, the president's new picks for the finance and treasury ministry, as well as the new central bank chief, will ensure Lira regains its pre-2014 value. Indeed, the lira's value has already sharply improved.
Narrative B
Turkey's economy will never jumpstart with Erdoğan in power, as his disastrous economic policies have devalued the currency and squandered foreign exchange reserves. Raising interest rates could tackle inflation, but it's unclear if Erdoğan has the tools and willpower to weather the economic storm and turn around the crisis-ridden country.
