Ankara: Turkey’s central bank said on Monday it would return to using the one-week repo rate as its main policy tool, overhauling its complex process of using multiple rates, a decision that gave a boost to the ailing lira.

For years the bank has relied on multiple rates to set policy, which economists said made monetary policy less predictable. Most recently, it has been funding through its late liquidity window rate, which it raised by 3 percentage points to 16.5 per cent last week to shore up a tumbling lira.

The bank said its one-week repo rate — which had previously been the main policy tool — would be set at 16.5 per cent and would once again be regarded as the main rate. The new framework would take effect on June 1, the CBRT central bank said.

“The CBRT has decided to complete the simplification process regarding the operational framework of monetary policy,” it said in a statement.

The bank has long referred to the need to move to a single policy rate as “simplification”. The overnight borrowing and lending rates will be determined at 150 basis points below and above the one-week repo rate, it added.

The lira firmed to 4.6070 against the US dollar after the announcement, from a close of 4.7052 on Friday. It was still 18 per cent weaker so far this year.

Investors have hammered the lira on concerns about President Recep Tayyip Erdogan’s grip on monetary policy and broader worries about his growing authoritarianism following a widespread crackdown against opponents.

Erdogan, a self-described “enemy of interest rates”, wants to keep borrowing costs low, particularly ahead of looming elections. Investors want to see aggressive rate hikes to rein in double-digit inflation.

“We think conducting funding through a single rate, the weekly repo rate, has increased predictability and sends a powerful signal to the markets that the tight stance will continue,” said Is Investment economist Muammar Komurcuoglu.

He said the late liquidity window funding rate would probably be announced at a higher level but it would not be used to conduct funding.

The currency had gained in early trade after investors cited weekend comments by central bank Governor Murat Cetinkaya signalling an imminent move to simplify policy.