While he predicted that the Central Bank (CBRT) would keep the policy rate constant at the Monetary Policy Committee meeting, he said that the attractiveness of the lira may increase in the coming months with the bank’s policies and the anticipated improvement in current transactions.
Inna Mufteeva, Natixis Central and Eastern Europe, Middle East, Africa Economist, “Considering the positive impact of this interest rate increase on the lira following the unexpected interest rate increase in March, which reinforced the credibility and independence of the current CBRT Governor, the CBRT may want to see how this decision is reflected in the Turkish economy from now on.”
Stating that the lira has stabilized for a while, or at least the rate of depreciation has slowed down, Mufteeva stated that the positive trend in foreign exchange is expected to alleviate some of the pressures arising from domestic prices in the coming months.
Mufteeva stated that since inflation data for April will be announced on May 3, it may be reasonable to expect this good trend in price dynamics to be confirmed.
On the other hand, Mufteeva stated that communication and forward-looking verbal guidance could be clearly hawkish, and predicted that, considering these factors, the current situation will continue and interest rates will remain constant.
“We expect the lira to strengthen in the second and third quarters”
Marek Drimal, Societe Generale Central and Eastern Europe, Middle East and Africa Strategist, predicted that the CBRT will keep the policy rate constant at 50%.
Recalling CBRT President Fatih Karahan’s statement in Washington, “Our biggest priority is to fight inflation and accumulate as much reserves as possible depending on market conditions,” Drimal noted that the attractiveness of the lira may increase in the second quarter of the year.
Emphasizing that the lira can be supported by the seasonal improvement in the current account and the effect of the CBRT’s monetary tightening after the tourism season gains momentum, Drimal said, “We expect the lira to strengthen in the second and third quarters.”
Economists participating in AA Finance’s expectations survey expect the CBRT to keep the policy rate constant at 50%.
The median of economists’ year-end policy rate expectations was 45%.
Source: AA / Prepared by Irem Yildiz