Turkey's Lira Rallies After Jumbo Rate Hike

The Turkish Central Bank made a surprising decision to increase its key policy rate to 25%, marking the largest hike in five years and the highest rate in two decades. This decision diverged from previous guidance of gradual rate hikes, catching markets off guard. Despite the increase, the policy rate remains significantly below the inflation rate, suggesting further hikes may be needed. The new central bank management's approach remains uncertain, with no clear pattern in their rate decisions.

What was the immediate market reaction to the Turkish Central Bank's decision?

• The dollar-lira exchange rate increased by 5%

• The dollar-lira exchange rate decreased by 5%

• The stock market surged

• The stock market crashed

How much did the Turkish Central Bank raise its key rate in the recent decision?

• 750 basis points

• 500 basis points

• 1000 basis points

• 250 basis points

What was the new key rate set by the Turkish Central Bank?

• 20%

• 25%

• 17.5%

• 22.5%

How does the current Turkish policy rate compare to the inflation rate?

• It is higher than the inflation rate

• It is equal to the inflation rate

• It is more than 20 percentage points below the inflation rate

• It is slightly below the inflation rate

What is the main uncertainty regarding the Turkish Central Bank's future actions?

• The impact on the stock market

• The potential for a decrease in rates

• The exact definition of 'gradual' in their approach

• The effect on foreign investments