Bloomberg interest rate forecast for the Central Bank

Financial circles in Turkey do not expect any change in the policy rate at the Central Bank Monetary Policy Committee (MPC) meeting to be held on March 12.

According to a report by Bloomberg News, the ongoing conflict in Iran is driving up energy costs, making it difficult to lower inflation, and this situation is expected to slow down the CBRT's steps toward interest rate cuts.

The sharp rise in one- and three-month overnight index swaps (OIS) recently has strengthened investors' expectations that the Central Bank will keep interest rates at high levels for a longer period. The activity recorded in swap markets drew attention as the fastest daily increase in the last year.

Analysts at world-renowned banks have also expressed the view that monetary policy in Turkey will continue to remain tight. Economists at JPMorgan Chase & Co. and Deutsche Bank AG announced that they expect the Central Bank to keep the interest rate steady in March compared to the last five meetings.

Monex Europe's head of macro research, Nick Rees, pointed out that the uncertainty in the Middle East requires the CBRT to maintain a cautious stance. Rees assessed, "If a ceasefire is achieved in the region by March 12, interest rate cuts could come back onto the agenda."

On the other hand, Deutsche Bank experts Christian Wietoska and Oliver Harvey reported that if the shock in oil prices continues, upside risks have been added to their year-end forecast of 30 percent for the policy rate.

Investors and market participants are closely monitoring the Central Bank's geopolitical developments with countries such as the United Arab Emirates and Saudi Arabia, and their impact on energy costs. Movements in derivatives markets have also increased expectations of volatility in the Turkish lira.

News Source: 12punto