Will Turkey’s Central Bank Continue to Raise Interest Rates?

Opinions differ on whether interest rates in Turkey have peaked.
Goldman Sachs expects that the latest increase in Turkish interest rates
will be the last in the current tightening cycle,
while other banks expect another rate hike in January.

Topic

Goldman Sachs’s Forecast

Other Banks’ Forecasts

Conclusion

Goldman Sachs’s Forecast

In a report, analysts Clemens Graf and Basak Edizgil say that interest rates will not rise above the current level of 42.5% unless there is a surprise in the inflation rate. They expect that lending costs will start to decline after the third quarter of next year, reaching 25% by the end of the year.

Goldman Sachs’s forecast is based on several factors, including:

• The decline in Turkey’s inflation rate from a peak of 85% in October last year to 61% in November of this year.
• The Turkish Central Bank’s forecast that inflation will fall to 36% by the end of this year.
• External pressure on the Turkish Central Bank to cut rates in order to support exports and attract foreign investment.
  

  Other Banks’ Forecasts

  Other banks, such as Morgan Stanley, Deutsche Bank, and Bank of America Securities, expect another rate hike in January.

  This forecast is based on several factors, including:

  • The continued rise in Turkey’s inflation rate, with analysts predicting that it will accelerate to 70% in the coming months.
  • The Turkish Central Bank’s desire to fully control inflation before starting to cut rates.

   

   

  Conclusion

  It is still unclear whether interest rates in Turkey have peaked. This will depend on several factors, including the evolution of Turkey’s inflation rate and external pressure on the Turkish Central Bank.

  In the end, the Turkish Central Bank will have to make a decision on interest rates based on its assessment of the economic situation in the country.

   

   

   

  Will Turkey’s Central Bank Continue to Raise Interest Rates?