According to analysts at Rabobank, it would be perfectly reasonable for the Turkish central bank to look for the earliest opportunity to start lowering its high interest rate of 24% to ease the burden on the struggling economy.
“Turkey emerged from recession in Q1, the outlook remains challenging due to persistently low confidence amongst households and corporates. Moreover, inflation continues to decelerate on the back of the strong disinflationary impact of weak consumption. However, it is too early to expect the CBRT to ease its monetary policy. The main reason is insufficient stability of the Turkish lira as observed since the end of March.”
“A volatile currency is a source of uncertainty for companies and consumers whose confidence in the lira remains low as reflected in rising FX deposits. Inflationary risk will not fully diminish and a double dip recession cannot be excluded unless sentiment towards the lira improves markedly and in a sustainable way.”
“As such, the CBRT to keep its policy rate unchanged at 24%.”