Hayri Kozanoğlu: The hot money Mehmet Şimşek is desperately traveling the world to find will not come under these conditions

Kübra Karasu- 12punto

The Central Bank of the Republic of Turkey's MPC (Monetary Policy Committee) meeting will convene tomorrow under the chairmanship of Hafize Gaye Erkan. The interest rate decision will be announced at 14.00.

Economist Prof. Dr. Hayri Kozanoğlu shared his predictions regarding the eagerly awaited interest rate decision:

“It is considered certain that the interest rate will be increased from 30 percent. If this is a 250 basis point increase, the impression will arise that the year could be closed at 35 percent. This would mean a positive interest rate slightly above the 33 percent projected by the economic management for 2024. However, the 33 percent inflation rate is not found realistic by commentators in the markets. In its latest assessment regarding Turkey, the IMF also estimated 2024 inflation at 46 percent. No one is interested in the hot money that Mehmet Şimşek is desperately traveling the world to find under these conditions and at these interest rates.

IT IS CONSIDERED CERTAIN THAT INTEREST RATES WILL BE RAISED

It is obvious that they are expecting a higher interest rate. However, interest rates need to be raised faster. For example, the scenario of a 500 basis point increase and closing the year with an interest rate of around 40 percent creates the risk of the wheels stopping and unemployment increasing in an economy that is already showing signs of slowing down. Therefore, the economic management is in a difficult situation in this sense, and it seems difficult to get approval from the palace to make faster interest rate hikes.”

IF INTEREST RATES ARE NOT RAISED, A SERIOUS JUMP MAY BE OBSERVED

Geopolitical developments and tensions in the world, and Israel's aggressive stance towards Palestine, are currently pushing up oil and raw material prices in the world, albeit not at a very high rate. This will make it difficult to bring inflation under control in Turkey, becoming a situation where higher interest rates are demanded.

I think that if the interest rate hike is limited to 250 basis points on October 26, there may be a slight rise in foreign exchange, but no very serious movement will be seen. With a 500 basis point interest rate hike, a short-term decline in exchange rates may be seen, even if limited. If interest rates are not raised, a serious jump in foreign exchange may be observed. I do not think this path will be chosen.

DEMAND FOR GOLD WILL INCREASE

Gold changes depending on the parity in the world. The rise in interest rates in America, the fact that the interest rate on ten-year bonds exceeded 5 percent last week, and the fact that 2-year bonds rose above 5 percent were negative developments for the dollar and gold. A decline had been observed in gold. But with these geopolitical developments, gold has recovered again and now the ounce of gold is hovering in the 1,970 - 1,980 dollar range. In general, in environments where the perception of geopolitical risk rises and distrust increases in the world, demand for gold as an investment vehicle that is light in weight but heavy in value increases. Indeed, we are observing this today as well.

News Source: Kübra Karasu