Today the Central Bank’s Monetary Policy Committee (PPK) will announce the interest rate decision after the Federal Reserve raised the interest rate by 25 basis points yesterday, the first hike since 2018.
The PPK, which kept the policy rate steady in January and February following four successive cuts, is expected to keep the interest rate steady at 14% at this meeting, according to all surveys. However, the high annual inflation, which reached 54.4% in February, poses a considerable risk to the Turkish economy.
Analysts project no interest rate change will occur at this meeting or at any other meetings held this year as the Central Bank has built the monetary policy on the liraization strategy. Although recent news speculates that the PPK may increase the policy rate, the economic world disregards these rumors.
Increasing energy and commodity prices caused by the ongoing Russia-Ukraine war have further worsened forecasts on inflation in Turkey. Annual inflation, previously estimated at 60% for this month, is now expected to hit around 65%. The year-end inflation has been increased to 40%. However, the Central Bank’s year-end inflation forecast stands at 23.2%.
Turkey’s shuttle diplomacy on the Russia-Ukraine war continues. The Communication Directorate announced that President Recep Tayyip Erdogan held a phone call with his Ukrainian counterpart Volodymyr Zelenksyy to discuss the latest developments in the war and diplomatic efforts to restore peace. During the phone call, President Erdogan underlined their intensive efforts on the diplomatic track to restore peace between Russia and Ukraine and said they aim to rapidly establish a permanent cease-fire. Erdogan also added that he will maintain his efforts to bring President Zelenskyy and Russian President Putin together.
In the meantime, Foreign Minister Mevlut Cavusoglu convened with his Russian counterpart Sergei Lavrov in Moscow. After talks with Turkish Foreign Minister Mevlut Cavusoglu, Lavrov told a joint news conference: “Today’s talks confirmed that we need to meet often and regularly exchange views on the key issues of our bilateral agenda, but first of all about the international situation, which has been experiencing deep changes.” Lavrov said he and Cavusoglu had assessed the political dialogue and bilateral ties between Russia and Turkey, including between presidents Vladimir Putin and Recep Tayyip Erdogan, and discussed preparations for a new meeting of the countries’ High-Level Cooperation Council. Ties between Russia and Turkey have growing importance for maintaining regional and global stability, and both countries are known for their ability to find optimal solutions to problems based on mutual benefit and a balance of interests, he said. Mevlut Cavusoglu, for his part, stated that Turkey’s priority is the evacuation of its nationals and civilians from Mariupol, along with an ‘urgent’ humanitarian cease-fire. He also said Ankara is working to achieve a permanent humanitarian cease-fire.
DAILY AGENDA
The short-term external debt stock rose by 4.3% to USD 125.5bn in January, compared to the end of 2021, according to the Central Bank.
The Central Bank will announce the interest rate decision (2:00 p.m.).
The Central Bank and the Banking Regulation and Supervision Agency (BDDK) will release weekly money and banking statistics (2:30 p.m.).
Foreign Minister Mevlut Cavusoglu will convene with his Ukrainian counterpart Dmytro Kuleba.
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