Turkey Expected to Maintain Interest Rates at 45% Next Week

According to a Reuters survey published on Friday, it is expected that the Turkish Central Bank will keep interest rates at 45% next week after raising them by 250 basis points last month, marking the end of a severe monetary tightening cycle.

The committee of monetary policy will meet on February 22nd, following the appointment of Fathi Qarakhani as the head of the central bank on the 3rd of this month. This appointment came after the resignation of Hafezat Ghaia Arkan, who stated that her decision was motivated by the need to protect her family from what she referred to as a media defamation campaign.

All 11 economic experts surveyed by Reuters agreed that the central bank will keep interest rates unchanged this month.

After the most recent interest rate hike, the central bank stated that it has achieved the necessary policy position to reduce inflation and that it will maintain this price level until there is a significant decrease in the underlying trend of monthly inflation.

According to the average expectations of experts in a Reuters poll, it is expected that interest rates will be at 37.5% by the end of 2024. Only one out of the ten institutions surveyed predicted that interest rates would remain at 45% until the end of the year. Estimates ranged from 35% to 45%.

In the previous month, inflation rate in Turkey jumped to an annual level of 64.9%, following a 6.7% increase on a monthly basis due to some significant annual price hikes at the beginning of the year and a 49% increase in the minimum wage. Market participants’ expectations for year-end inflation range from 40% to 45%.

The central bank will announce its decision on interest rates on February 22nd. (Reuters)