Markets

Market lowers expectation of interest rate cut from CBRT

Bloomberg HT Research Unit’s survey on the Central Bank of the Republic of Turkey’s interest rate decision has been concluded.

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The median expectation of the 21 institutions participating in the survey is that the CBRT will not make any changes at the July meeting and will keep the policy rate unchanged at 19 percent.

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While the institutions participating in the survey share the expectation that the next step from the CBRT will be on the interest rate cut side, 1 institution in August, 6 institutions in October, 5 institutions in November, 2 institutions in December, 1 institution in January 2022 and 1 institution in March 2022 stated that He thinks he will give a discount. 5 institutions did not comment on when the interest rate cut will be made.

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While the median expectation of 19 institutions participating in the year-end policy rate estimation survey indicates that interest rates will be at the level of 18 percent by the end of 2021, the lowest claim for the end of the year was 16 percent and the highest claim was 19 percent.

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In the previous survey, the median assumption of 16 institutions that announced their year-end interest rate expectations was 16 percent.

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While the median assumption for the year-end policy rate, which was 16 percent in the previous survey, rose to 18 percent in this survey period, it was also striking that the interest rate cut expectations were delayed due to timing.

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Foreign institutions also revised their expectations

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Bank of America analysts, including Zümrüt İmamoğlu, said in a research report they published that they thought that the Central Bank of the Republic of Turkey would not raise interest rates until the beginning of next year.

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The cluster, which expects inflation to reach 18 percent in July after the surprise increase in inflation in June and the increases in electricity and natural gas, stated that inflation will remain at these levels until October and will decline to 16.2 percent at the end of the year.

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Stating that it is difficult to reach the CBRT’s current inflation target of 12 percent and that an interest rate hike would be supportive, BofA analysts said that the CBRT would prefer to wait and rely on the base effect.

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Inflation from Goldman, interest rate expectation from Citi

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After the higher-than-expected June inflation data, Goldman Sachs increased its year-end inflation claim for Turkey from 15.5 percent to 16 percent. Citigroup, on the other hand, stated that they do not expect any further rate cuts this year following the inflation data.

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In a note shared with its customers, Goldman Sachs said, “After the hike in electricity and natural gas prices and the upside surprise today, we are increasing our year-end assumption to 16 percent,” Goldman Sachs emphasized that the Central Bank of the Republic of Turkey will have the opportunity to lower interest rates very slightly in the fourth quarter.

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Citi said after the inflation data, “The conditions for monetary easing are getting more and more difficult. “We don’t expect a reasonable rate cut in November or December,” he said.

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Barclays and JPMorgan also revised their expectations

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While Barclays has increased its year-end inflation forecast for Turkey from 13.8 percent to 14.8 percent, it expects the CBRT to make a 250 basis point cut instead of a 350 basis point rate cut in the fourth quarter.

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The US investment bank JPMorgan also lowered its year-end inflation expectation for Turkey from 13.4 percent to 14.7 percent, and the end of 2022 consumer inflation claim from 10.5 percent to 11.5 percent, after the June inflation rate exceeded expectations. took it out.

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Dollar/TL and inflation update from Deutsche Bank

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Deutsche Bank announced in a research report that it revised its year-end inflation claims from 15 percent to 16 percent after the hikes in electricity and gas prices.

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Stating that the burden of natural gas in the inflation basket is 1.69 percent and electricity is 2.71 percent, the institution said that the direct impact of these increases on inflation will be 61 basis points.

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Emphasizing that the effect of the increases made at the beginning of July can be understood more appropriately with the inflation data for July, Deutsche Bank stated that they expect the inflation to increase rapidly in July to over 18 percent.

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The institution, which updated its year-end claim for USD/TL from 9.00 to 9.50, underlined that the recently announced necessary reserve measures signaled a return to unconventional monetary policy measures.

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