While foreign economists pointed out the determination of the Central Bank of the Republic of Turkiye (CBRT) in the fight against inflation with the interest rate decision, they stated that the effects of the monetary tightening could be seen later.
CBRT Monetary Policy Committee (MPC) increased the one-week repo auction interest rate, which is the policy rate, by 500 basis points to 35%.
In the announcement made by the CBRT regarding interest rates, it was said: “The transition of tax regulations to inflation due to the cost-oriented pressures arising from wages and exchange rates that have been effective recently has been significantly completed.”
In Touch Capital Markets Senior FX Analyst Piotr Matys, in his evaluation to the AA correspondent, noted that this major interest rate increase confirms that the CBRT remains determined to control inflation and re-fix inflation expectations.
However, Matys stated that the 35% policy rate does not seem to provide significant support to the lira, and stated that although TL is a currency with relatively attractive high returns in nominal terms, it has become less attractive when compared to high inflation.
Matys pointed out that the TL may have difficulty gaining permanent value until inflation reaches its peak and decreases from there.
“CBRT may take a break from the policy rate after it reaches 40%”
Nick Stadtmiller, Head of Market Research at Medley Advisors, stated that the CBRT continues to increase the policy interest rate to get closer to the current deposit interest rates paid by banks.
Predicting that the CBRT will increase by another 500 basis points, Stadtmiller stated that interest rate increases may be suspended after the policy rate reaches 40% to see the effects of the latest tightening in the bank’s monetary policy.
Stating that the delayed effects of this year’s monetary tightening may not be felt until the spring, Stadtmiller said that authorities may be cautious against excessive tightening, which could have a huge impact on growth next year.
Bluebay Asset Management Emerging Markets Senior Strategist Timothy Ash evaluated that two more 500 basis point increases could be made by the end of the year.
Source: AA / Prepared by Irem Yildiz