Türkiye’s central bank is expected to raise its policy rate by 500 basis points to 20% this week, a Reuters poll showed on Monday, making good on its pledge of further tightening with another sharp hike to curb inflation which is set to rise again.
The central bank raised its policy rate by 650 basis points in June to 15%, while promising to continue tightening until a significant improvement in the inflation outlook is achieved.
Prediction for rate hiking
Economists see a further hike this week to 20%, according to the median estimate of 23 economists in a Reuters poll, with forecasts ranging between 17% and 21.50%.
Inflation eased to 38.21% by June but is expected to rise again. The year-end forecast stood at 51.50% in the latest Reuters poll, but economists now say it will likely be around 60% after Ankara hiked several tax rates.
The central bank’s one-week repo rate (TRINT=ECI) had been slashed to 8.5% from 19% since 2021 under Erdogan’s economic program. The bank had also used foreign exchange reserves to prop up the lira.
Net reserves stand at $13.17 billion
As a result of the recent policy reversals, the central bank’s net international reserves rose to $13.17 billion in the week to July 7, continuing to rebound from a record low of $-5.7 billion it touched in June.
The central bank will announce its rate decision at 1100 GMT on Thursday.