Central Bank (CBRT) expected to continue with reduction in policy interest

The Monetary Policy Committee of the Central Bank (CBRT) is expected to continue the easing cycle at its meeting next week, despite the rise in inflation and the sharp depreciation of the TL, and set the policy rate at 15% by reducing it by 100 basis points.

A prominent economist has said that although general conditions, especially inflation, do not allow, he expects the CBRT to make a discount this month, and base on recent data this discount may continue in December, albeit more limited.

Despite the rising inflation and the sharp depreciation of the lira, the CBRT has gone to a rate cut of 300 basis points in the last two months in the belief that the elements leading to an increase in inflation are temporary.

The depreciation of the Turkish lira against the dollar, which has been rapidly losing value in recent years – due to President Tayyip Erdogan’s  insistence (and instructions, likely) to reduce interest rates and frequent changes in the management of the Central Bank, has exceeded 25 percent this year.

“INFLATION WILL REMAIN ABOVE 20 PERCENT IN THE SECOND HALF OF 2022”

The dollar/TL rose to a new record high of 9.9750 today. Headline inflation was at 19.89 percent in October, rising to a nearly three-year peak.

In the meantime, Deutsche Bank has said in a research note that they think that the policy rate will be lowered faster than expected after core inflation, which came in below expected in October, and the CBRT’s emphasis on the current account balance. Deutsche Bank also said, “We expect headline inflation to finish the year at 19.5%. We think that the depreciation of the TL and the increase in international commodity prices will outweigh the positive base factor that will occur in the last two months of the year. Inflation will remain above 20% in the second half of 2022.”

Deutsche Bank expects to see two interest rate cuts of 100 basis points (each) in November and December meetings of the CBRT, and notes  that the policy stance and real interest points to an additional depreciation in the lira.

Central Bank (CBRT) expected to continue with reduction in policy interest

The Monetary Policy Committee of the Central Bank (CBRT) is expected to continue the easing cycle at its meeting next week, despite the rise in inflation and the sharp depreciation of the TL, and set the policy rate at 15% by reducing it by 100 basis points.

A prominent economist says that although general conditions, especially inflation, do not allow, he expects the CBRT to make a discount this month, and base on recent data this discount may continue in December, albeit more limited.

Despite the rising inflation and the sharp depreciation of the lira, the CBRT has gone to a rate cut of 300 basis points in the last two months in the belief that the elements leading to an increase in inflation are temporary.

The depreciation of the Turkish lira against the dollar, which has been rapidly losing value in recent years – due to President Tayyip Erdogan’s  insistence (and instructions, likely) to reduce interest rates and frequent changes in the management of the Central Bank, has exceeded 25 percent this year.

“INFLATION WILL REMAIN ABOVE 20 PERCENT IN THE SECOND HALF OF 2022”

The dollar/TL rose to a new record high of 9.9750 today. Headline inflation was at 19.89 percent in October, rising to a nearly three-year peak.

In the meantime, Deutsche Bank has said in a research note that they think that the policy rate will be lowered faster than expected after core inflation, which came in below expected in October, and the CBRT’s emphasis on the current account balance. Deutsche Bank also said, “We expect headline inflation to finish the year at 19.5%. We think that the depreciation of the TL and the increase in international commodity prices will outweigh the positive base factor that will occur in the last two months of the year. Inflation will remain above 20% in the second half of 2022.”

Deutsche Bank expects to see two interest rate cuts of 100 basis points (each) in November and December meetings of the CBRT, and notes  that the policy stance and real interest points to an additional depreciation in the lira.

The CBRT Monetary Policy Board (CPC) will announce its interest rate decision on November 18 at 14:00.