Turkish lira gains as central bank keeps stable interest rate

The Turkish lira strengthened by as much as one per cent versus the U.S. dollar on Thursday after the Turkish central bank decided to hold its benchmark interest rate steady.

The bank in Ankara announced that the key rate would remain at 14 per cent.

It was a change in approach after four months of consecutive rate cuts.

The bank had been cutting the interest rates since September when it was 19 per cent in line with President Recep Tayyip Erdogan's demands.

As a result, the lira had lost more than 44 per cent versus the dollar during the past 12 months.

Inflation spiked to 36 per cent in December, its highest level in about 20 years of Erdogan's rule.

Turkish consumers already struggled to make ends meet due to high energy and food prices.

The central bank emphasised on Thursday that its mid-term goal was to bring inflation down to an ambitious 5 per cent.

Critics blame Erdogan's interference in the central bank's monetary policy.

The Islamic conservative president defended an unorthodox theory that higher interest rates caused higher inflation.

He had replaced three central bank governors and fired some key bank officials in the past two years, denting market confidence.