Deutsche: Turkey Completed Its Rate Increase Cycle

According to Deutsche Bank economists, Turkey has completed its cycle of rate increase. CBRT increased the interest rate by 200 basis points.

The rate hike of 200 basis points exceeding the market expectations of the Central Bank of the Republic of Turkey (CBRT) is still being talked about in the markets. An evaluation on the subject was also made by Deutsche Bank. Economists of the institution, including Fatih Akçelik, stated that this decision taken at the March meeting marks the end of the cycle of rate hike as long as external conditions do not deteriorate and short-term inflationary pressures are no more than expected. While economists expect that inflation in Turkey will relax to the level of 11.5 percent towards the end of the year, it is stated in the base scenarios that the CBRT will maintain this stance until the end of the first half of the year. The institution estimated that after this period, the CBRT will cut the policy rate to 15 percent at the end of the year, with a total interest rate cut of 400 basis points.

CBRT Increases Interest Rates Above Expectations

In its March meeting, the CBRT raised the policy rate by 200 basis points to 19 percent and reiterated its strong tightening messages. The expectation of the market was to increase the interest rate by 100 basis points. In the text of the decision, it was underlined that it was decided to make a strong additional front-loaded monetary tightening, taking into account the risks on inflation expectations, pricing behavior and the medium-term inflation outlook.