Economy in Turkey: Central Bank may take a “stronger” surprise step
Successive macroeconomic measures have also changed the expectations of local and foreign economists for this week’s Monetary Policy Committee meeting of the Central Bank. While foreign investment banks indicate that a surprise increase of 2.5-5 points would not be surprising, local analysts suggest that a 5-point increase would not be unexpected, and some economists believe that a strong verbal guidance could also be provided.
The Central Bank’s Monetary Policy Committee will hold its most critical meeting before the local elections on Thursday this week. The Central Bank, which announced in its February meeting that the policy rate was at a sufficiently tight level and would maintain this level as necessary, is facing intense demand for foreign currency from both local and foreign markets, declining reserves, credit and credit card growth exceeding expectations, and uncontrollable domestic demand.
A stronger step may come
Foreign investors have begun to disclose their expectations of interest rate hikes for the March meeting after the Central Bank, which has taken successive quantitative tightening measures in recent weeks. While local economists also state the necessity of a minimum of 500 basis points interest rate hike, some economists have noted that although a much stronger increase may not occur in March, the policy rate could be raised to 60% or higher in April. Some economists also shared the opinion that instead of a pre-election hike, a strong verbal guidance could be given.
Several moves have been made successively
The Central Bank has continued to take measures concerning TL deposit interest rates, loans, foreign exchange transactions, and credit cards since last month. Firstly, the Central Bank announced that it would start paying interest on the reserve requirements held by banks for TL deposits in order to accelerate the upward trend in TL deposit interest rates, which it deemed insufficient. In response to the increasing foreign exchange transactions, the Central Bank issued a verbal warning. As the credit growth reached significant levels, the Central Bank tightened the limits on consumer and commercial credit growth even further. Additionally, verbal instructions were given to banks to limit cash withdrawals from credit cards to 3 installments and 25% of the card limit.
According to sources in the banking sector, directives were also given to increase interest rates on consumer and commercial loans, with commercial loan interest rates exceeding nearly 65%. In some banks, commercial loan limits were restricted to 100,000 TL.
Original article by Şebnem Turhan (ekonomim.com)
Edited and translated by BTT
