The Central Bank of the Republic of Turkey will announce its interest rate decision today at 14:00. While the majority of economists expect the bank to raise the interest rate by 5 points, the statements in the decision text will be important.
The decision, which is the most critical agenda of the week, will be announced at 14.00. The median expectation is that the bank will raise the one-week repo rate (policy rate) by 500 basis points from 30 percent to 35 percent. Some foreign banks estimate the increase at 2.5
While some foreign investors are of the opinion that it will remain at the 40 percent level, some foreign investors are of the opinion that an earlier approach to the 40 percent band would not be a surprise. Markets may experience volatility depending on the Bank’s decision and messages.
At the MPC meeting held last month, the policy rate was raised by 500 basis points from 25.00 percent to 30 percent.
Ahead of the critical policy meeting, dollar hit an all time high against Turkish Lira. Shares in Istanbul dropped 7% on Wednesday in a slide that traders attributed to comments by Turkish President Tayyip Erdogan on the Gaza conflict, including saying the Palestinian militant group Hamas was not a terrorist organisation.
While dollar prices rose as high as 28.36 TRY in the shallow market; it saw 28.15 TRY for the first time when Turkish markets were open. Euro, on the other hand, continue to move at the 30 TRY psychological level.
While all 20 economists participating in the Reuters survey expected an increase in the policy rate at 30 percent, the forecasts were in the 32.5 percent to 35 percent band. Four economists predicted an increase of 250 basis points, one economist 300 basis points and 15 economists 500 basis points in the policy rate.
State news agency AA Finans’s expectations survey was finalized with the participation of 19 economists. The median of economists’ expectations for the change in the policy rate was realized as 500 basis points increase. According to the survey results, the policy rate expectations of economists, who predicted an increase of 250 to 500 basis points, were between 32.50 percent and 35 percent. The median of economists’ year-end policy rate expectations was 40 percent.