Positive support from Germans and Americans to the Turkish economy

International financial institutions such as German Deutsche Bank and US Goldman Sachs react positively to the last 500 basis point interest rate increase of the Central Bank of the Republic of Turkey (CBRT).

While Deutsche Bank states that confidence in the Turkish lira has increased after this move by the CBRT, Goldman Sachs emphasizes that the reliability of the Central Bank will increase. At the Monetary Policy Committee meeting held the previous day, the CBRT unexpectedly increased the policy rate by 500 basis points to 50 percent.

The decision text stated, “The Board decided to increase the policy rate, taking into account the deterioration in the inflation outlook.” According to a report published by Deutsche Bank, this interest rate increase by the CBRT signals that there is renewed confidence in the Turkish lira.

According to the report, although the bank has recently closed its Turkish lira positions due to the pressures on the CBRT reserves, there is an increasing confidence in entering long positions again after the interest rate increase.

This report also emphasizes that the CBRT’s interest rate increase is an important step towards achieving Turkey’s disinflation targets and that the current account balance is at a better point. According to Goldman Sachs’ analysis, the 500 basis point interest rate increase is a one-time step and is not the beginning of an interest rate hike cycle. However, it is anticipated that this decision will increase the reliability of the Central Bank in ensuring price stability and transitioning to a more sound monetary policy.

The analysis also predicts that there may be a sharp decline in inflation in the second half of the year and that the CBRT may start to loosen monetary policy starting from the third quarter. It is stated that this situation may contribute to annual inflation falling to 33 percent and reaching 32.5 percent by the end of 2024.ChatGPT