Deutsche Bank's dollar and interest rate forecast for Turkey! Date given for rate cuts

Deutsche Bank Middle East and Eastern Europe Research Director Christian Wietoska noted that the shift in the monetary policy stance in Turkey and the fiscal measures taken since the elections have supported the Turkish Lira.

Responding to questions from Ceren Dilekçi Köseoğlu of BloombergHT, Wietoska said, "We are seeing an acceleration in cash inflows to the market along with the rebalancing in the economy. We haven't seen such high inflows into the Turkish bond market for a long time. The stabilization of capital inflows could bring about a better process."

"OUR YEAR-END 2024 EXCHANGE RATE TARGET IS 36"

Noting that they expect the rise in the exchange rate to continue on a nominal basis, Wietoska continued his words as follows:

"We believe that the exchange rate will perform very well on a real basis, especially towards the elections. Our Dollar/TL exchange rate target as of the end of 2024 is 36. We believe that the depreciation in nominal terms will be very gradual."

Pointing out that the rally in long-term bonds has accelerated recently, Wietoska stated that they expect a 25 percent yield on 10-year bonds at the end of 2024.

"WE EXPECT A 250 BASIS POINT INTEREST RATE HIKE"

Noting that they expect a 250 basis point interest rate hike from the CBRT at today's meeting, Wietoska said that their base scenario is for another 250 basis point hike in January. According to Wietoska, there is a risk that interest rates will remain at the 42.5 percent level. Therefore, the messages the CBRT will give on Thursday will be important.

The institution's peak interest rate expectation is 42.5-45 percent. Noting that they expect inflation to peak at 70 percent in May and then fall sharply in the summer, Wietoska said the following regarding interest rate cut expectations:

"This decline will give the CBRT room for interest rate cuts in 2024. We anticipate that the CBRT could begin interest rate cuts as of the beginning of the 4th quarter. Recently, interest rate cut expectations from the FED and the ECB have been brought forward. I think this could also happen in Turkey. The CBRT could start cutting interest rates after the summer. If interest rate cuts start too early, it could cause pressure on portfolio flows and the TL. If inflation falls to 50 percent, the CBRT could start discussing the pace of interest rate cuts. Our base scenario is that interest rate cuts will begin as of the last quarter of 2024, but we do not ignore the possibility of starting interest rate cuts at the end of the summer."

News Source: 12punto