Angry at the RBA for interest rate hikes? In this country, rates just hit 25 per cent

Despite the hardship interest rate rises have imposed on Australians with outstanding debts, they might still spare a thought for the citizens of this country.

Australia's current interest rate of 4.1 per cent is still sitting at its highest level since 2012. Source: AAP / James Ross

If you're an Australian currently paying off a mortgage, you may have spent the last year dreading the monthly cash-rate announcement by the Reserve Bank of Australia.

Although Australia's central bank paused its regular rate hikes this month, the current rate of 4.1 per cent is still sitting at its highest level since 2012.

In the lead-up to the federal election of May 2022, rates were at a record low of 0.1 per cent. The four-percentage-point increase since then is the most rapid tightening of rates in more than 30 years.

Despite the hardship this has imposed on those faced by those with outstanding debts, Australians might still spare a thought for the citizens of Türkiye.

Source: SBS News

Türkiye's razor-sharp rates rise

On Thursday last week, Türkiye's central bank hiked its key interest rate by a whopping 750 basis points to 25 per cent.

The bank's policy committee said it would tighten "as much as needed in a timely and gradual manner" to cool inflation, which soared to nearly 48 per cent last month.

The surprise move left the policy rate at its highest level since 2019, and sent the Turkish currency to its strongest level since mid-July.

Türkiye's central bank embarked on a monetary tightening cycle in June after President Tayyip Erdogan appointed former Wall Street banker Hafize Gaye Erkan as governor of the bank.

Analysts said the move was the clearest step yet toward more orthodox policies after years of unorthodoxy under Erdogan, and should help rein in inflation expectations.

Under the previous governor, the bank had slashed rates to 8.5 per cent from 19 per cent in 2021 in line with Erdogan's unorthodox belief that high rates fuel inflation.

That sparked a currency crisis and the lira weakened 44 per cent in 2021, 30 per cent in 2022, and another 30 per cent by August of 2023.

Türkiye's grip on central bank and unorthodox policies

Erdogan appointed Erkan to head the central bank after his May re-election, in the face of an economy strained by depleted foreign currency reserves and soaring inflation expectations.

He named three new policymakers - Osman Cevdet Akcay, Fatih Karahan and Hatice Karahan - to the bank in July in another signal that independent economists would more forcefully tackle inflation, which has held well above the official 5 per cent target for years.

Türkiye's central bank had slashed rates to 8.5 per cent from 19 per cent in 2021 because of Erdogan's unorthodox belief that high rates fuel inflation. Credit: Sipa USA

The central bank said that rising oil prices and a deterioration in inflation expectations suggest that inflation will end the year at the upper bound of its forecasts. Still, "disinflation will be established in 2024," it added.

The currency is down about 68 per cent in two years largely due to Erdogan's previously outspoken opposition to high rates and influence over the central bank.

It crashed again this summer as the new economic team in Ankara loosened the state's grip on foreign currency markets and began shedding unorthodox policies and regulations.

The central bank has also selectively tightened credit. At the weekend it began rolling back a costly scheme, adopted to halt the late-2021 currency crash, that protects lira deposits against forex depreciation.