What will be the Central Bank’s interest rate decision, when will it be announced?
The expectation of the Central Bank’s interest rate decision is between 17% and 21.50%. Dollar/TRY started to rise again on concerns that the interest rate decision to be announced by the Central Bank (CBRT) on Thursday might not meet market expectations.
WHEN WILL THE CENTRAL BANK INTEREST DECISION BE ANNOUNCED?
The Central Bank’s interest rate decision will be announced on Thursday, July 20 at 2:00 p.m.
HOW MUCH IS THE INTEREST EXPECTATION OF THE CENTRAL BANK?
The Central Bank (CBRT) is expected to continue its gradual rate hikes, which began last month, raising the one-week repo rate by 500 points to 20%.
The 23 economists polled by Reuters expect a rate hike this week, with estimates in the range of 17% to 21.50%.
With the effect of the exchange crisis caused by the low interest rate policies and the continuous depreciation of the TL, inflation reached 85.51% in October 2022, the peak of 24 years. Inflation, which fell to 38.21% in June, is expected to rise again in the following months.
CPI estimates are revised higher due to the 20% appreciation in TL and tax increases in June. As economists wait for the double-digit monthly CPI for July, they say it is inevitable to revise their year-end forecasts from 50% to 60%, perhaps even higher.
While the upward trend in inflation continues after the hikes, the size of the CBRT interest rate hike will be important to markets. According to the Reuters survey, the CBRT is expected to continue raising interest rates in the coming months. In the survey, the median of end-2023 interest rate projections is 25%. Estimates range from 24% to 35%. As a result of Erdogan’s policies until recently, the CBRT reduced the one-week repo rate from 19% in 2021 to 8.5%. While interest rates stayed low despite high inflation ahead of the election, the CBRT was selling from reserves to prevent TL’s value from falling further.
While low interest rates and reserve sales implemented before the election supported the LT, they could not stop the depreciation. With changes in policy after the presidential and parliamentary elections in May, the use of the reserve to determine the value of TL was suspended. In exchange policy, steps were taken towards “more transparent” policies. As a result, the CBRT’s net international reserves rose to the level of $13.17 billion as of July 7. Since CBRT’s net bookings declined to -$5.7bn on June 2, the lowest value in the data series beginning in 2002, it has rebounded by $18.9bn in the past five weeks.