New interest rate forecast for the CBRT from BofA! How high will it go?
The interest rate decision of the Central Bank of the Republic of Turkey (CBRT) has become a subject of curiosity. The world-renowned Bank of America stated that the CBRT could implement a 300-500 basis point interest rate hike in April.
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BofA economists Zümrüt İmamoğlu, David Hauner, and Claudio Irigoyen wrote a note titled "Turkey trip notes: The hiking cycle may be over, but tightening continues" following their visit to Turkey last week.
The report also stated that there is a possibility that the CBRT could raise interest rates by 300-500 basis points in April.
Sharing their expectations for the CBRT, the economists stated that further increases in the policy rate would help manage inflation expectations better than macroprudential measures and would lead to an increase in confidence in the CBRT.
WILL THERE BE CAPITAL INFLOW?
The statement included the following: "We think there is room to be optimistic about Turkish assets in the 2nd half of this year. There is a possibility that the CBRT will raise interest rates by 300-500 basis points at the April meeting. This is not our base case, and this increase will depend on the March inflation data. In the event of an interest rate hike, capital inflows could resume in the 2nd quarter."
Expecting policy to tighten further and data to improve towards the summer, the economists stated that the pessimism in the first quarter is likely temporary.
It was noted that no sudden increase in exchange rates is expected after the local elections to be held on March 31, and that the recent increases in the exchange rate are estimated to be temporary.