Commerzbank’s Tatha Ghose expects the Central Bank of Turkey to keep rates on hold, seeing this as a tactical pause rather than a shift in strategy. He criticizes recent easing as unjustified given entrenched inflation and a worsening current account, and forecasts a continued, managed depreciation path for the Turkish Lira against major currencies including USD/TRY.
CBT pause seen as temporary
“Turkey’s central bank (CBT) will most likely keep its policy rate on hold at today’s monetary policy meeting.”
“While this might appear to be a prudent pause in the easing cycle because inflation data have recently surprised to the upside, we believe the decision will be driven purely by tactical limitations rather than fundamental rethink of strategy. Just weeks ago, policymakers were still signalling a dovish bias, but the market turbulence stemming from the Iran war will likely curb their enthusiasm.”
“Our preferred inflation measure, which is calculated from month-on-month changes of core price levels (seasonally-adjusted), is still running at a pace of nearly 3%m/m.”
“Nevertheless, we remind readers that we view all recent rate cuts as unjustified and dangerous for asset prices.”
“We forecast the lira exchange rate to keep depreciating at a steady pace, following its recent pattern of managed steps and downward breaks.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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