Türkiye’s central bank is anticipated that it will increase its policy rate to 20% this week, according to a Reuters poll.
However, some economists expect a more moderate increase, considering that previous rate hikes in recent months fell short of expectations.
The central bank embarked on a tightening cycle in June, after President Recep Tayyip Erdoğan appointed former Wall Street banker Hafize Gaye Erkan as governor.
As part of the policy pivot, the bank has tightened its one-week repo rate (TRINT=ECI) by 900 basis points, raising it from 8.5% to 17.5%.
It has promised to gradually tighten policy further as necessary to avoid the negative impact of high rates on the economy.
The median estimate of 17 institutions in the Reuters poll was for a 250-basis-point hike in the policy rate to 20%, with forecasts ranging from 18% to 20.50%.
The bank has also begun to simplify macro-prudential measures – tools to ensure the financial system’s stability – implemented under the former governor, and has supported the rate hikes with qualitative and selective credit tightening. This weekend, it began rolling back a costly scheme that protects lira deposits against forex depreciation.
Prediction for annual inflation
The bank sees annual inflation at 58% at the end of the year.
Economists expect the bank to continue to hike rates and see the policy rate at 25% by year-end, according to the median estimate of seven economists, with forecasts ranging between 20% and 30%.
The central bank will announce its rate decision on Aug. 24.
By Breaking News Turkey with Reuters
