New statement from Wells Fargo, which predicted 'the dollar will fall': 'Essentially, this approach...'

Wells Fargo International Economist Nick Bennenbroek spoke about the dollar/TL forecasts included in their 2024 International Economic Outlook report. Bennenbroek stated that their thesis is valid under the assumption that the Central Bank of the Republic of Turkey (CBRT) will continue its conventional policies. 

Speaking to ekonomim.com, Bennenbroek emphasized that their thesis holds true provided that the Central Bank of the Republic of Turkey (CBRT) continues to implement conventional policies and that a decline in inflation is observed. Bennenbroek stated, "We also noted that the general conviction in this new view on the Turkish lira is not high, and that the Turkish lira could lose value again if the policy landscape changes."

"WE ASSUMED IT WOULD FOLLOW CONVENTIONAL MONETARY POLICY"

Wells Fargo, one of the largest banks in the US, shared a highly notable forecast regarding the dollar/TL in its recently published 2024 International Economic Outlook report. 

The bank predicted that the dollar/TL would rise to the 31 level in the first quarter of 2024, but would return to the 30.50 level in the second quarter and fall to 29.50 in the fourth quarter. The bank's dollar/TL forecast for the second quarter of 2025 was 28.50.

Speaking about these forecasts, Wells Fargo International Economist Nick Bennenbroek stated that they wrote the report in December 2023 and said, "Essentially, this approach argues that the Central Bank of the Republic of Turkey will continue to follow a more conventional monetary policy approach, and that this conventional approach, combined with high interest rates and declining inflation, will eventually lead to the Turkish lira gaining value against the US dollar."

Regarding the debates surrounding the report, Bennenbroek said, "We also noted that the general conviction in this new view on the Turkish lira is not high, and that the Turkish lira could lose value again if the policy landscape changes."

"THE CENTRAL BANK WILL MAINTAIN ITS INDEPENDENCE"

In the report co-authored by Bennenbroek, it was stated that President and AKP Chairman Erdoğan's tendency to leave monetary policy to central bankers would be tested in the local elections, and the following was noted: "In our view, the Central Bank of the Republic of Turkey will maintain its independence before and after the elections. Interest rates will remain high, inflation will gradually decline, the country's credit ratings will be upgraded, and the lira will begin to recover, albeit likely on a bumpy and non-linear path."

Regarding the trajectory of the Turkish lira, the report stated: "In this sense, we now believe that the Turkish lira will fully strengthen starting from the 2nd quarter of 2024 and that the strength of the lira will continue until the beginning of 2025. While our conviction in this new view on the lira is not very strong, our view will revert to a lira depreciation forecast if the policy landscape changes."

News Source: 12punto