According to TEPAV’s assessment, the Central Bank of the Republic of Turkiye (CBRT) should increase the policy rate to 47.5%. TEPAV also stated that the CBRT should indicate that additional tightening may be made depending on the data.
Turkish Economic Policy Research Foundation (TEPAV) pointed out that in addition to increasing the Central Bank’s policy interest rate to 47.5%, an additional tightening message should be given.
In the conclusion section of the note published by the TEPAV Macroeconomics Working Group consisting of Ekrem Cunedioglu, Ali Cufadar, Fatih Ozatay and Burcu Aydin Ozu Dogru stated following, “In light of the evaluations, the repo rate should be increased to 47.5% and it should be stated that additional tightening may be made depending on the data.”
In the note, attention was drawn to the need to review the practice of TL swap market transactions against foreign currency, and the opinion was included: “The maturity of these transactions should be gradually shortened and the amount should be reduced.” TEPAV also suggested implementing a year-end inflation target.
TEPAV pointed out that the main problem in terms of monetary policy is how to reduce inflation, which is expected to reach a peak of around 75% in May, to 36% by the end of 2024, and how to continue this downward trend in the following period, and made the following statements:
“Today, three more developments are observed that deepen this basic problem. The first one stems from the fact that the difference between the 2023 central government budget and the 2023 central government cash budget has reached unprecedented levels… Secondly, the average inflation expectation for the end of 2024 is still at a high level of 43%. The third is the possible inflationary effects of the fiscal measures that can be taken to reduce the budget deficit, which is expected to be over 6% of GDP in 2024.”
The report also included the opinion that although the policy rate was increased to 45%, the process was not sufficiently reflected in Turkish lira deposit rates.
Source: Patronlardunyasi / Prepared by Irem Yildiz