Turkish central bank raises key rate to 12 per cent from 7.75 per cent to boost falling lira

ANKARA, Turkey – Turkey’s central bank has raised its key interest rate to 12 per cent from 7.75 per cent to try to stave off inflation and support the national currency, which has fallen sharply in recent weeks.

The decision was taken Tuesday at an emergency meeting the central bank called for after the currency, the lira, hit a record low.

The central bank said its goal is to lower the country’s inflation rate, which reached 7.4 per cent in December. In a statement, it forecast that inflation will fall to its 5 per cent target by mid-2015. The central bank said it would keep rates high until there are signs that inflation is declining.

The lira has been dropping amid concerns that a bribery scandal might destabilize the government. Like currencies in other emerging markets, the lira has also been battered by concerns over a slowdown in global growth and the potential impact of the withdrawal of the Federal Reserve’s stimulus in the United States.

A higher interest rate is intended to draw investor money into Turkey, which could boost the lira’s value.