Türkiye's central bank has moved to hike interest rates by five hundred basis points, taking borrowing costs from 25 percent to thirty. It comes amid rising inflation, which is edging back to sixty per cent. 

Following his re-election in May, where the cost of living dominated concerns for many voters at the polls, President Erdogan shook up his economic team, appointing former Goldman Sachs banker Hafize Gaye Erkan as chief of the central bank. She was joined in office in June by finance minister Mehmet Simsek, a former Merrill Lynch economist, who returned to government after seven years away.

Facing an economy recovering from an inflation spiral that reached eighty five percent last October, along with depleted foreign exchange reserves and a currency crisis, policymakers immediately began moving to cool prices. The benchmark borrowing rate rose from 8.5 percent to 15 percent in their first rates decision in June.

In a statement after Thursday's latest rise, Hafize Gaye Erkan said she is determined to "establish a disinflation course" in Türkiye by next year, adding that more monetary tightening will be on the way until prices are subdued.

Her announcement is in complete defiance of the previous policy of the AKP government under President Erdogan, who has pursued a course of cheap borrowing for years. Erdogan, an avowed opponent of interest rate rises, had previously told party supporters he would never increase borrowing costs while he was in office.

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Analysts have welcomed the announcement from the central bank. "The overall direction of policy towards a more hawkish bias should in general be taken as a positive by investors," said James Wilson, EM sovereign strategist at ING. 

Hasnain Malik, managing director of at Tellimer added that the rise "does enough to show commitment to the orthodox correction of policy" but warned "there is some more pain still in store."

Others point to signs of a wider improvement in the outlook for Türkiye. A dollar denominated bond sale by two of the republic's biggest lenders VakıfBank and Yapı Kredi raised over $1.3bn earlier in September. The ratings agency Fitch has just raised the country's score from negative to stable.

Long term Türkiye watchers are heralding what they see as the end of the ultra loose rates policy and a sign that, with the AKP now in its third decade in power, independence has been restored to the central bank.

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