Turkey surprises with huge interest rate hike

ISTANBUL, Aug 24 (AFP): Turkey's central bank on Thursday delivered a huge surprise by raising the interest rate to 25 per cent as part of a transition from President Recep Tayyip Erdogan's era of unorthodox economics.
The hike of 7.5 per centage points follows a raise to 17.5 per cent from 15 per cent last month.
Most economists had expected the bank to increase its policy rate Thursday to 20 per cent.
"Recent indicators point to a continued increase in the underlying trend of inflation," the central bank said.
"Monetary tightening will be further strengthened as much as needed in a timely and gradual manner until a significant improvement in the inflation outlook is achieved," it said. The lira gained 1.5 per cent against the dollar in wake of the bank's strong signal that is was stepping up its fight against inflation and attempts to support the troubled currency.
Capital Economics analyst Liam Peach said the "much larger-than-expected" rate increase "will go a long way towards reassuring investors that the shift back to policy orthodoxy is on track".