Large difference in foreign banks’ interest rate forecasts

After Hafize Gaye Erkan was appointed President of the Central Bank (CBRT) and Mehmet Şimşek as Minister of Treasury and Finance, the markets were locked in the decision of the Monetary Policy Committee (PPK), which will be announced tomorrow.

US financial agency Bloomberg also included notable analysis ahead of tomorrow’s CBRT interest rate decision.

In the news, it was claimed that two former Wall Street bankers, Mehmet Şimşek and Hafize Gaye Erkan, faced a severe test at a time when the estimates of international financial institutions were quite different from each other.

IT WILL AFFECT THE PROCESS OF THE NEW ADMINISTRATION

“Tomorrow’s decision may be the biggest step in a return to economic orthodoxy and may set the course for the new administration of President Recep Tayyip Erdogan,” the report said.

In the Onur Ant news, it was reminded that there is an extremely wide range of predictions regarding the interest rate decision of Wall Street banks. Analysts agree that Turkey will raise rates for the first time in more than two years. However, it is not clear how large the increase will be, according to surveys.

HIGHEST ESTIMATE 40 PERCENT, LOWEST ESTIMATE 14 PERCENT

The highest estimate for the policy rate, which currently stands at 8.5 percent, came from Goldman Sachs. The US bank forecast interest rates to rise to 40. The lowest estimate came from British Standard Chartered. The bank predicted that the CBRT would raise the interest rate to 14 percent with a more modest increase.

Bank of America analysts, including Zümrüt İmamoğlu, said: “The possibility of a gradual correction outweighs a quick correction.”

In a Bloomberg survey, more than a third of experts predicted that interest rates would rise to 20 percent.

If the policy rate is 20 percent, the real interest rate will be around -20 percent based on inflation close to 40 percent. This will be the lowest real interest rate in the world among more than 50 economies tracked by Bloomberg.

THE POSSIBILITY OF GRADUAL INCREASE IS HIGH

According to Morgan Stanley economists Hande Küçük and Alina Slyusarchuk, the MPC will likely start gradually bringing the benchmark rate closer to TL deposit rates without putting pressure on the financial system.

“After initial normalization steps, the central bank will likely take a more aggressive tone and signal further rate hikes to lower inflation expectations,” the economists said.

“Given the macro-financial stability risks that may arise from the rapid rise, we believe the policy shift will take the form of a gradual tightening cycle,” said Bloomberg economist Selva Bahar Baziki.