Haluk Bürümcekçi: We expect the interest rate hike cycle to be concluded

The CBRT Monetary Policy Committee (MPC) raised the one-week repo auction rate, which is the policy rate, by 250 basis points to 42.50 percent.

In the CBRT announcement, which emphasized that the Committee anticipates completing the monetary tightening steps as soon as possible, it was stated, "The Committee will continue quantitative tightening by increasing the variety of sterilization tools used to support the monetary tightening process."

AA Finans analyst and economist Haluk Bürümcekçi, in his assessment, said, "While the median expectation in various surveys conducted before the decision was for a 250 basis point hike in the policy rate, the highest estimate was at the 500 basis point level. Therefore, the CBRT raising the policy rate in line with expectations and giving the message that there could be at least one more hike was a supportive development for the TL."

Stating that he expects the monthly upward trend in inflation to continue to weaken in the coming period, assuming that controlled and moderate depreciation in exchange rates will continue as it has in recent months, Bürümcekçi predicted that the annual inflation trend, on the other hand, will maintain its upward trajectory until the end of May.

Bürümcekçi assessed, "While we expect the 12-month inflation expectation, which is followed in terms of the real level of the policy rate and has recently fallen to around 41.2 percent, to continue to decline, we expect the interest rate hike cycle to be concluded with the policy rate reaching 45.00 percent next month, and for this interest rate level to be maintained until the middle of next year."

"The carry trade opportunity in the TL is likely to attract a significant amount of investor inflow in the new year"

Societe Generale Central and Eastern Europe, Middle East, and Africa Strategist Marek Drimal emphasized that the CBRT has promised to complete its tightening cycle as soon as possible.

Stating, "This would be consistent with our view that the CBRT will make another 250 basis point hike in January to reach 45 percent," Drimal noted that the bank's tight monetary policy is working, momentum in inflation is decreasing, and credit expansion has eased significantly.

Drimal said, "While risks and uncertainties continue in 2024, the carry trade opportunity in the TL is likely to attract a significant amount of investor inflow in the new year."

News Source: 12punto