ISTANBUL — Goldman Sachs said Türkiye may need to keep interest rates at elevated levels for longer than previously expected, citing risks from higher energy prices and potential depreciation of the Turkish lira.
In an analysis published following July inflation data, Goldman Sachs economists Clemens Grafe and Başak Edizgil said ongoing risks related to energy prices and the exchange rate warranted a cautious monetary policy stance.
The bank highlighted uncertainty over global energy prices as a key upside risk to Türkiye’s inflation outlook. The removal of the country’s fuel price adjustment mechanism by October, combined with continuing conflicts in the Middle East, could put additional upward pressure on energy prices.
Inflation remains above the central bank’s target
Türkiye’s annual inflation rate eased to 31.8% in July, down from 32.1% in June, marking the second consecutive monthly decline.
Despite the slowdown, inflation remains well above the 26% year-end target set by the Central Bank of the Republic of Türkiye (CBRT).
Goldman Sachs maintained its 29% year-end inflation forecast for Türkiye but said the risks to that projection had shifted upward.
“Risks stemming from higher energy prices and a faster depreciation of the Turkish lira point to interest rates remaining at elevated levels for longer,” the economists said.
Core inflation shows signs of improvement
Goldman Sachs noted that while services inflation deteriorated somewhat in July, broader measures of core inflation continued to improve.
The bank said all core inflation indicators pointed to an overall improvement in underlying price pressures during July. On a three-month moving-average basis, the momentum in core inflation has returned to levels seen in the first quarter of the year.
The assessment suggests that underlying inflation dynamics are improving, but energy prices and exchange-rate developments remain key risks that could influence the pace of monetary easing in the months ahead.
Source: Patronlar Dünyası/ Prepared by: İlayda Gök