Türkiye’s central bank is gearing up for its inaugural Monetary Policy Committee meeting of the year, scheduled for Thursday, with a primary focus on the interest rate.
The central bank, amid widespread expectations, appears poised to sustain its tightening policy initiated in June. This strategy saw a substantial surge in interest rates, climbing from 8.5% to 42.5% by the close of 2023.
Anticipations now point towards an additional 250 basis points increase, pushing the rate to 45% this week.
Contrary voices are sparse, as most market observers dismiss the likelihood of the interest rate remaining unchanged. A segment of survey participants even envisions a reduction in interest rates during the final quarter of the year.
Alpaslan Çakir, the Chairman of the Turkish Banks Association, is among those anticipating further tightening measures. He foresees one last interest rate hike during this week's Monetary Policy Committee meeting, suggesting that Türkiye might soon pivot to a global trend of reducing interest rates.
Çakir envisions the commencement of an interest rate-cutting cycle in the fourth quarter.
Governor Hafize Gaye Erkan of Türkiye’s central bank had previously signaled a moderation in the pace of monetary tightening in December.
She emphasized the institution's commitment to concluding the tightening cycle at the earliest opportunity.
Çakir, projecting a rise in inflation until May, envisions a subsequent decline to approximately 40-45% by year-end. This forecast exceeds the central bank's end-of-year projection of around 36%.
The potential 250 basis points increase in interest rates, if implemented, might not trigger a significant surge in deposit interest rates. However, experts warn that this hike could compound with elevated interest rates on loans and credit cards, leading to increased costs.
Analysts stressed the pivotal importance of the statements to be issued by the central bank in case this step was taken.
