Why are Turkey’s interest rates soaring post-Erdogan’s 2023 re-election?

Turkey’s interest rates climbed sharply after Recep Tayyip Erdoğan won re-election in May 2023 because the government and central bank began reversing years of unusually low-rate policy while inflation and pressure on the lira were mounting.

Before the election, President Erdoğan had repeatedly argued that high interest rates fuel inflation. Despite very high inflation, the central bank cut its benchmark rate to 8.5% by early 2023. That approach made borrowing cheaper, but it also weakened confidence in the lira and contributed to demand for foreign currency.

After the vote, Erdoğan appointed a more orthodox economic team, including Finance Minister Mehmet Şimşek, and the central bank started raising rates. The benchmark rate went from 8.5% in June 2023 to 50% in March 2024. The sharp increases were intended to curb spending and credit growth, make holding lira more attractive, and bring inflation expectations under control.

The timing mattered: after securing another term, Erdoğan had more room to tolerate policies that could be unpopular with borrowers and businesses. The shift also aimed to restore investor confidence and reduce pressure on Turkey’s foreign-currency reserves. It was not an overnight fix—prices had already risen rapidly, and rebuilding confidence takes time—but the rate hikes marked a clear change in economic policy.

So, the surge was less a sudden discovery that rates needed to be high than a reversal of the previous low-rate strategy in response to persistent inflation, a falling lira, and strained confidence.