The Central Bank increased the policy rate by 350 basis points to 46 percent. Experts note that the decision holds symbolic importance for the markets. Foreign institutions have also updated their interest rate predictions.
Following the Central Bank’s interest rate decision, expectations have been adjusted. The CBRT raised the policy rate to 46 percent, where it funded the market, and the overnight borrowing rate to 49 percent. This marks the first increase in 13 months, putting an end to the interest rate cut cycle after three meetings. Experts emphasizing the symbolic importance of the interest decision for the markets predict that in case of normalization and relaxation, the policy rate will first return to its normal range instead of being reduced. It is pointed out that this decision will allow Minister of Treasury and Finance Mehmet Şimşek and the Central Bank’s management to deliver strong messages at next week’s IMF Spring Meetings. It was emphasized that inflation, demand for foreign currency, and global developments will be decisive factors in the upcoming interest rate decision.
INTEREST RATE PREDICTIONS FROM MAJOR BANKS
Goldman Sachs expressed expectations of interest rate cuts starting again in July if there are no new shocks in the markets. The year-end policy rate forecast was raised from 28.5 percent to 33 percent. Morgan Stanley announced it expects interest rate cuts to resume in July.
RATE MEETING IN JUNE
Analysts mentioned that the bank has created a significant maneuvering room until the next meeting. According to the Central Bank’s schedule, the next meeting will be held on June 19th.