Erich Arispe Morales, Senior Director and Turkey Analyst at international credit rating agency Fitch Ratings, said that they expect the Central Bank of the Republic of Turkey (CBRT) to maintain a tight monetary policy stance and that they expect the CBRT to start cutting its policy rate in the first quarter of next year.
After Fitch Ratings upgraded Turkey’s credit rating from “B+” to “BB-” and changed its rating outlook to stable on September 6, Fitch Ratings organized a webinar titled “Turkey: Progress and Challenges in the Policy Rebalancing Process” on September 6.
Speaking at the webinar, Morales said that the upgrade of Turkey’s credit rating was driven by reduced external vulnerabilities and financing needs. Despite this, high inflation remains the main policy challenge for Turkey and the economy has started to slow down, Morales said, “We expect the CBRT to maintain a tight monetary policy stance and may start to cut policy rates in the first quarter of next year.
Turkey’s economic program has upside surprises, but there is also a risk of policy reversal and an early easing of the tight monetary policy stance. However, we anticipate that political support for economic policy will continue.”
Morales said that the rebuilding of the credibility of monetary policy, the continuous reduction in external financing requirements and the implementation of reforms that will contribute to rebalancing are factors that have a positive impact on the credit rating.