LONDON, Aug 24 (Reuters) - Turkey's central bank aggressively lifted its key interest rate by 750 basis points to 25% on Thursday, far more than expected, sparking a lira rally as part of its post-election policy U-turn to address rebounding inflation.
The move sparked a rally in the country's financial markets with banking sector stocks soaring nearly 10%, the lira rising and its dollar-denominated government bonds also making solid gains.
COMMENTS:
TIMOTHY ASH, BLUEBAY ASSET MANAGEMENT, LONDON
"Really solid move by the CBRT (central bank) to hike policy rates arguably above expectations by 750bps to 25%."
"Cevdet Akcay, Hatice Karahan et al are, I think, giving Hatice Gaye Erkan the backing to be more aggressive with rate hikes."
"The CBRT now has a really impressive team in place - there is light at the end of the tunnel."
PIOTR MATYS, SENIOR FX ANALYST IN TOUCH CAPITAL MARKETS, LONDON
"After disappointing the market since her appointment in June, Governor Erkan impressed investors by raising the policy rate to 25% from 17.5% at today's meeting. This is significantly higher than the consensus expectation for a hike to 20%".
"While today’s decision sends a very strong signal that the CBRT is determined to rein in inflation and the initial market response is very positive, at least some investors will be wondering whether the 750bps hike has been approved by President Erdogan, who according to many market watchers is influential when it comes to the central bank." (Compiled by Reuters markets reporter)
