Goldman Sachs on interest rates: Was the hike a one-off?

12PUNTO FOREIGN NEWS

Investment bank Goldman Sachs has commented on the Central Bank of Turkey's decision to raise interest rates by 500 basis points, sharing the view that this does not necessarily mean further rate hikes will follow. According to Goldman Sachs, the rate hike may be a one-off adjustment made to slow the depreciation of the Turkish Lira and to cope with rising inflation.

In a report published by Goldman Sachs, it was noted that the decision was influenced by expectations that the Turkish Lira would continue to lose value, alongside the spread of the view that inflation targets would not be met.

The report stated, "We continue to expect annual inflation to fall sharply in the second half of the year, declining to 33 percent by year-end, and for the TCMB to begin easing monetary policy from the third quarter, reaching 32.5 percent by the end of 2024."

According to the report, the TCMB's 500 basis point rate hike does not mean that new rate hikes will be implemented in the coming months. Goldman Sachs suggests that if the depreciation of the Lira is halted and inflation is brought under control, the likelihood of interest rates being kept stable or gradually lowered is higher.

On the other hand, Goldman Sachs praised the decision, highlighting that it could be considered an indicator of the TCMB's credibility. The report included commentary suggesting that this situation could be accepted as proof of the Central Bank's seriousness regarding the transition to orthodox monetary policies and the achievement of price stability (bringing inflation under control), as well as its commitment to continuing on this path.

News Source: 12punto