ANKARA — Turkey’s Central Bank hiked interest rates Thursday by 500 basis points from 25% to 30%.

A statement following its monthly monetary policy committee meeting on Thursday cited rising inflation and fuel prices to justify the hike. “Inflation readings were above expectations in July and August,” it read. “As the strong course of domestic demand and the stickiness of services inflation persist, the increase in oil prices and the ongoing deterioration in inflation expectations pose additional upside risks to inflation.”

It is the fourth interest rate hike since Turkish President Recep Tayyip Erdogan’s U-turn from his unorthodox monetary policy to keep rates low despite high inflation. After his reelection in May, he appointed two mainstream economists to helm the country’s economic management: Finance Minister Mehmet Simsek and Central Bank Governor Gaye Erkan. The duo pledged for a return to rational economic policies and monetary tightening.

Under Erkan, a former US banking executive, the bank has hiked its policy rates by 2150 basis points over the last three months. After its meeting on Thursday, the bank reaffirmed its pledge, stating, “Given the monetary tightening stance, the Committee is determined to establish the disinflation course.”

Prior to the appointment of the new economic management team, the bank dropped its interest rates as low as 8.5%, fueling inflation and speeding the devaluation of Turkish lira in line with Erdogan’s 'growth at any cost' economic policy.

This breaking story has been updated since its initial publication.

Join hundreds of Middle East professionals with Al-Monitor PRO.

Business and policy professionals use PRO to monitor the regional economy and improve their reports, memos and presentations. Try it for free and cancel anytime.