Expectation of interest rate hike at the Central Bank before the elections

Deutsche Bank has revised its policy rate forecast for Turkey due to the deterioration in inflation dynamics.

The bank stated that a 500 basis point interest rate hike at the March meeting is 'highly likely' and that the rate could rise from 45 percent to 50 percent.

"WE EXPECT IT TO BE GRADUAL"

Analysts led by Yiğit Onay stated, "Policies are moving in the right direction. Fitch's recent credit rating upgrade is also a reflection of the return to orthodox policies. 

However, economic challenges persist in the short term.

These include persistent inflationary pressures and a significant decline in the bank's net reserves. 

The upcoming local elections are creating uncertainty.

There is also concern that the depreciation of the Turkish Lira will increase demand for foreign currency. 

In the long term, we expect the CBRT to remain on hold until the final quarter and for interest rate cuts to be gradual. We maintain our year-end policy rate forecast at 45 percent," the statement read.

News Source: 12punto