Bloomberg Survey: Turkey’s Central Bank to increase interest rates by 250 basis points

According to a survey organized by Bloomberg HT, institutions participating in the poll expect a 250 basis point increase in interest rates. The Central Bank (CB) has been increasing interest rates since the May 2023 elections. Most recently, in October, interest rates were raised by 500 basis points to 35%.

The median expectation of the 27 institutions participating in the Bloomberg HT interest rate survey is that the interest rate will increase by 250 basis points to 37.5% in November. The highest expectation in the survey is 40%, while the lowest expectation is 37.5%. The median year-end interest rate expectation of the institutions is also 40%.

WHAT HAD HAPPENED EARLIER?

Despite warnings, the government’s (President Erdogan’s, actually) insistence on a low-interest policy led the economy into a crisis. To recover, figures such as Mehmet Şimşek and Gaye Erkan, who were favored by the markets, were appointed. It was expected that the new administration would “normalize” economic policies, and the Central Bank would raise interest rates. However, although interest rate hikes were made in the first two meetings, they were deemed insufficient and incomplete by economists. This continued to raise questions for foreign investors.

However, the 750 basis point increase on August 24 was considered positive by the markets. The CB most recently raised the interest rate to 35% with a 500 basis point increase in October.

TURKEY STILL VERY MUCH IN NEED OF FOREIGN EXCHANGE

The need for foreign exchange in the Turkish economy still continues (in fact, even more). Therefore, after the elections, Şimşek turned his attention to the Gulf to find foreign exchange.

Now, efforts are underway to attract Western investments. Erkan and Şimşek attended an investor meeting organized by JP Morgan in Istanbul at the beginning of August. Burak Kaynak, Head of JP Morgan Turkey Desk, said that Erkan made a comprehensive and technical presentation focusing on the inflation outlook and monetary policy. Rcently, Şimşek met with investors in France and Britain and attended the annual meetings of the IMF and World Bank in Morocco. Thereafter, Şimşek turned his attention back to the Gulf.

WORLD BANK ACCEPTED TO GIVE A USS 35 BILLION INVESTMENT PACKAGE

On September 7, the World Bank announced a $35 billion (937 billion 598 million 550 thousand TL) investment package for Turkey to “stabilize the economy.”