The Central Bank Monetary Policy Committee (PPK) increased its key interest rate by 750 basis points to 25 percent on August 24. Before the rate hike was announced, the Central Bank also took new measures to pave the way for a return to TL deposits from KKM (FX protected deposit scheme).
Earlier in the week, JPMorgan Chase & Co. and Morgan Stanley forecast a 500 basis point interest rate increase at the meeting on September 21, while Barclays predicted a 250 basis point step.
Although Barclays analysts did not see a much sharper move as unlikely, they said they expected ‘gradual increases’ after the above-expected interest rate increase in August.
“The CBRT will prefer to continue the tightening cycle in a more gradual manner to limit its impact on banks, companies and households,” said analysts, adding: “In addition, macroprudential tightening continues at full speed and the central bank is likely to think that the need for a larger increase is mitigated by the former.”
Barclays continues to estimate that the policy rate in Turkey will be 35 percent at the end of this year and 40 percent at the end of 2024.
NEW DOLLAR and EURO forecasts
The bank also recently emphasized that the risks to dollar/TL are in the upward direction if dollarization pressures develop again.
Barclays announced its dollar/TL, Euro/TL and policy rate forecasts. Stating that Turkish authorities are focusing on closing the current account deficit, Barclays stated that they expect the Turkish lira to be allowed to depreciate.
Predicting that the CBRT policy rate will limit the pressure on the Turkish lira to some extent, Barclays predicted that the policy rate will be 35 percent at the end of the year and 40 percent in 2024.
he bank expects dollar/TL to rise to 29 by the end of 2023, 32 in March 2024, 35 in June 2024, and 39 in September 2024.
Barclay, which put forward its end-2023 forecast for Euro/TL as 31.32, predicted that Euro would be 34.56, 38.15 and 42.90 in March, June and September 2024.
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