Barclays: New interest rate cuts coming to Turkey – At 19 against the pound in 2022

The Central Bank of Turkey (TCMB) will continue to cut interest rates in December and January, with monetary policymakers maintaining the “absurd view” that the pound fall and rising inflation are temporary, Barclays said. , according to the Turkish newspaper Dünya.

Loose monetary policy means the pound is likely to weaken to 14.5 against the dollar by the end of the year, to 15.5 to the dollar in the first quarter of 2022 and to 16 to the dollar in the second quarter of 2022, Barclays said. The currency is likely to maintain these levels for the rest of the year, he said, adding that it will weaken to 19.04 against the euro by the end of 2022.

In a report titled “This time is different”, the UK-based bank said it expects the Central Bank of Turkey to ignore investor concerns, reducing the benchmark interest rate by 2 percentage points to 13% this month. Monetary policymakers are likely to continue with a further 1 percentage point drop in January, he said.

Turkey’s central bank has cut its benchmark interest rate to 15% from 19% in the past three months, following an order from Erdogan, who says higher interest rates are inflationary. Annual consumer price inflation accelerated to 21.3% in November from 19.9% ​​the previous month.

Inflation is expected to reach 30% in the coming months, Barclays said.

The pound fell about 30 percent against the dollar in November as the central bank continued to cut interest rates and Erdogan reiterated that lower borrowing costs were central to government policy. The pound hit a record low of $ 13.97 last week on Thursday morning it was trading at 13.75 against the dollar at 12:25 p.m. local time in Istanbul.

Petros Kranias

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