Turkish central bank expected to raise rates to 35% on Oct. 26 - Reuters poll
By Ezgi Erkoyun
ISTANBUL (Reuters) — Turkey's central bank is expected to deliver another hefty rate hike of 500 basis points this week, a Reuters poll of economists showed on Monday, as it continues to tighten policy against rising inflation.
After years of pursuing loose policy, the central bank reversed course after May's election and began hiking rates to bring down inflation, which touched 61.5% in September.
The median estimate of 20 economists in a Reuters poll for the policy rate was 35%, up from the current 30%. Four economists forecast a hike of 250 basis points and one expected a lift of 300 basis points.
«The central bank's focus has remained on anchoring inflation expectations and achieving disinflation… (A hike to 35%) would lead to a positive ex-ante real policy rate based on the 33% inflation forecast for 2024 in the medium-term plan,» ING wrote in a research note.
Since June, the central bank has turned its focus from economic growth to disinflation and lifted its policy rate by 2,150 basis points while other macroprudential measures such as credit tightening to cut domestic demand were also put in place.
The median forecast in the poll for the year-end policy rate was 35%. The central bank is expected to hike rates further to 40% in the first half of next year, the poll also showed.
Further depreciation in the Turkish lira and increases in taxes and fees have fanned inflation, eating into Turks' savings despite tighter monetary policy.
Despite expected interest rate hikes, inflation was seen remaining elevated through the rest of this year, ending 2023 at 69.3%, the median of the poll of 10 institutions showed. Estimates in the Reuters poll ranged between 64.6% and 73.0%.
Inflation is forecast to stand
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