Following the decision of the Central Bank of the Republic of Turkey to keep the policy rate constant, the first comments from foreign institutions indicated that high inflation expectations were maintained.
Economists at JPMorgan and Goldman Sachs predicted that inflation will hover around 60 percent during the year.
JPMorgan Economist Yarkın Cebeci stated that there is a disconnect between the economic outlook and monetary policy decisions in Turkey, and that the serious negative real interest rate created by the Central Bank is a concrete reflection of this situation.
Explaining that they expect inflation to hover above or around 60 percent until December, Cebeci said that this indicates that real interest rates will remain negative for a long time.
Cebeci stated that this environment left the Turkish lira in a fragile position.
Cebeci, who said that the Central Bank looked optimistic in its latest decision, stated that they did not foresee a change in the policy rate until the end of the year.
Goldman Sachs also predicted that inflation will hover around 60 percent.
Goldman Sachs has estimated that annual inflation in Turkey will remain above 60 percent throughout 2022.
The US bank stated that inflation in Turkey will remain high due to the "unstable" policy stance of the authorities in Turkey and the rise in energy prices after Russia's invasion of Ukraine.
"We expect inflation (in Turkey) to remain above 60 percent annually for most of 2022, with effects coming from different channels. Turkey's balance of payments may weaken due to the ongoing conflict in the region and the sluggish risk appetite in emerging markets," the bank said. " used the expressions.
CBRT passed again
The Central Bank of the Republic of Turkey (CBRT) has decided to keep the one-week repo rate, which is the policy rate, at 14 percent. All of the institutions participating in the Bloomberg HT survey also predicted that the interest rate would be kept constant.
In the resolution text of the Monetary Policy Committee, it was stated that “Geopolitical risks that turned into conflicts and variants in the epidemic keep the downside risks on global and regional economic activity alive and cause uncertainties to increase even more”.
The statement included the prediction that "the disinflationary process will begin with the re-establishment of the global peace environment and the elimination of base effects in inflation", and the statements "In this framework, the Board decided to keep the policy rate constant".
The statement “the current account balance is expected to have a surplus in 2022” used in the previous MPC text dated February 17, 2022 was not included in this statement. On the other hand, the CBRT said, “The risks arising from energy prices in the current account balance are closely monitored”.
With this decision, the Central Bank left the interest rate constant at the third MPC meeting in a row. Previously, a total of 500 basis point rate cuts were made in four non-stop meetings, starting in September 2021.
After the February consumer inflation data announced at the beginning of this month rose to 54.44 percent, mainly due to food and energy prices, Turkey's real interest rate has dropped to minus 40.44 percent compared to the actual inflation.
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