Expert Comments on the Central Bank's Interest Rate Decision

Expert Comments on the Central Bank's Interest Rate Decision Expert comments on the Central Bank's interest rate decision. The Central Bank of the Republic of Turkey decided to increase the policy rate from 8.25% to 10.25% after today's meeting. Taking this decision following the expectation that the Central Bank will keep the interest rates constant, the experts' market estimates have changed. A right step but alone is not enough Experts who made an assessment to Bloomberg HT regarding the rate hike, stated that the decision was correct, but it would not be sufficient by itself to provide confidence. Piotr Matys, Rabobank emerging markets FX strategist: “The decision taken to slightly reduce the risks regarding prices and financial stability is an important step in the right direction. Despite the 200bps increase, we still have to be careful, as the policy rate is still negative considering inflation. The CBRT needs to do more to build confidence and maintain the stability of the lira in a sustainable way. " Nigel Rendell, Europe, Middle East and Africa Director at Medley Advisor: “The lira rallied a little but did not gain as much value as expected due to the surprise of the CBRT's decision. It is not enough to raise the interest rate alone for the bank to regain confidence. " Monex Europe FX markets analyst Simon Harvey Simon Harvey, who said that the interest rate subsidies were not sufficient and he returned to the strategy in 2018, "With this decision, the CBRT, drawing the red line in FX markets, showed that it is determined to set a limit to prevent further depreciation of the TL. Hervey added that "whether there was an interest rate hike cycle like in 2018 or whether a front-loaded rate hike was made" is the main concern. "Decision; It shows that the Central Bank is concerned about the effects of the exchange rate transition to inflation and the inflation outlook " Bilkent University Faculty of Economics Professor, who was a guest at Bloomberg HT. Dr. Hakan Kara and Is Portfolio Deputy General Manager Nilüfer Sezgin; stated that the decision indicated that the Central Bank was concerned. In the text of the decision, “It was predicted that the supply-side factors linked to the epidemic that affect inflation will gradually disappear in the normalization process and demand-side disinflationary effects will become more pronounced. However, as a result of the rapid recovery in the economy with strong credit momentum and developments in financial markets, inflation followed a higher course than expected. " Speaking based on his statements, Bilkent University Department of Economics academic staff member Prof. Dr. Hakan Kara; “In the second half of the year, the Central Bank was acting on the argument that a disinflationary process would be entered, as supply-side effects disappeared and demand-side effects were temporary. For this reason, the Central Bank was giving a signal that there was no need to raise interest rates. However, with this paragraph in the decision text, the CBRT gave the message that as a result of the strong credit momentum and rapid recovery combined with the increase in exchange rate, inflation followed a higher than expected course and in this context, it was necessary to take a stronger and clearer step to control the expectations. Source: Bloomberg HT