Markets turn their eyes to April 22: S&P announces interest rate forecast for the Central Bank

According to international credit rating agency S&P, it is expected that the Central Bank will not change interest rates this week, but may take additional measures by maintaining a tight monetary policy.

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Markets turn their eyes to April 22: S&P announces interest rate forecast for the Central Bank

Expectations are strengthening that the Central Bank of the Republic of Turkey (CBRT) will keep interest rates unchanged at the Monetary Policy Committee meeting to be held this week. S&P Global Market Intelligence officials stated that in light of current economic indicators and regional developments, the Central Bank may take additional monetary tightening steps.

NO GROUND FOR INTEREST RATE CUTS

Associate Director of European Economics Andrew Birch assessed that "the bank is likely to continue tightening liquidity and taking other non-interest rate measures." Birch also emphasized that rising import-driven inflationary pressures, a widening current account deficit, limited foreign capital inflows, high yield spreads in the bond market, and low foreign exchange reserves do not create an environment for interest rate cuts.

Birch stated, "Rising imported inflation pressures, a widening current account deficit, limited foreign capital inflows, larger bond yield spreads, and low foreign exchange reserves constitute arguments against the central bank resuming interest rate cuts."

GEOPOLITICAL RISKS CREATE UNCERTAINTY

Birch also conveyed that the impact of the war environment in Iran on Turkish markets remains uncertain and could reduce the effectiveness of previous steps taken to combat inflation. For this reason, the CBRT is not expected to begin interest rate cuts before December.

MARKETS' EYES ON APRIL 22

The CBRT's highly anticipated interest rate decision will be announced on Wednesday, April 22, at 14:00. Most economists in the market expect the policy rate to be held at 37 percent. Along with the geopolitical tensions in the Middle East, it is noted that some market actors have postponed their potential interest rate cut expectations to July.

CREDIT RATING AND EXPECTATIONS

Last week, S&P Global Ratings reaffirmed Turkey's credit rating at "BB-/B" and its outlook as "stable." The agency had stated that potential fluctuations in energy costs and the recovery in foreign exchange reserves would be decisive for a rating upgrade.

News Source: 12punto