Search ForexCrunch

Turkey’s central bank will bring interest rates to single digits within months, before rising again next year on the build-up of inflation, according to Goldman Sachs Group Inc.

The central bank’s interest rate more than halved since last July to 11.25%.

Key quotes

The authorities will prioritize growth and reduce the policy rate as much as possible without destabilizing the lira.

Recent inflation dynamics and growth in money aggregates, in our view, also increase the risk of renewed lira volatility.

The key rate is forecasted to reach 10.75% at the end of 1Q, 10% at the end of 2Q, 9.75% at the end of 3Q, and then stay on hold until end-2020. Previous forecasts were for the benchmark at 11.5% by the end of 1Q, 11% by the end of 2Q, and then remaining unchanged through the rest of the year. 

The Turkish lira on Friday weakened past the 6-per-dollar mark for the first time since late May. At press time, USD/TRY is trading at 5.9874.