Turkey monetary policy July 2022

As expected, the Turkish Central Bank (TCMB) held its July 21 meeting. As a result, the one-week repo rate remained unchanged at 14.00% despite inflation rising to 78.6% in June.

In its deliberations, the Bank stated that inflationary pressures were driven by factors outside its sphere of influence. Specifically, the war in Ukraine, supply chain disruptions and soaring commodity prices. Furthermore, the TCMB reiterated that it “expects [the] The start of the process of easing inflation against the background of the measures taken and their decisive implementation.” The Bank also continued to emphasize its attempts to strengthen the lira of the economy to achieve price stability. Looking at the economy, TCMB noted that with the help of external demand, the Turkish economy grew strongly in the first half of 2022. However , the repercussions of the war in Ukraine and the possibility of a recession in the main trading partners “keep the risks [the] Alive current account balance. “

The bank’s tone in the press release changed little from the previous meeting; It doubled the lira as a tool to achieve a “permanent fall in inflation”. While the majority of committee members expect the central bank to stand idly by for the remainder of this year, some expect an uptick due to hyperinflation. However, the president remains a staunch opponent of such a measure.

Clemens Graf, chief economist at Goldman Sachs, added:

Looking ahead, we expect interest rates to remain unchanged at +14.00% through 2023 and therefore see real interest rates heading deeper into negative territory in the fourth quarter of 2022 – driving up headline inflation and offsetting year-end inflation expectations. We expect inflation to rise to +90% and only drop to +75% y/y at the end of 2022 with the help of base effects.”

The next meeting is scheduled for August 18.

Last month, members of the FocusEconomics committee saw the one-week repurchase rate expiring in 2022 at 15.56% and 2023 at 20.38%.

Related Posts

Leave a Reply

Your email address will not be published.