Investors received the messages from the new CBRT management, new economics staff and President Mr. Erdoğan very well. As soon as possible, economic decision-makers should support these goodwill messages with actions. The market is waiting for more precise and orthodox monetary policy movements. In other words, to follow the simplification path after 2018 and to increase the policy rate ... The interest rate to be taken as reference should be at a point that will create an additional tightening effect and strengthen the real return position ... At the same time, the Central Bank should be in a position to continue to hike interest rates when necessary.
After the changes in the economy management and the Central Bank, very positive messages were given to the market. Under the Central Bank's Mr. Naci Ağbal administration, expectations that he would return to Orthodox monetary policy and at the same time bring transparency and predictability to Bank’s policies gained weight. While the communication leg has been managed so well, we expect the action leg to continue with a policy rate hike at the interest meeting tomorrow. After this stage, we can wait for the declaration of simplification by re-establishing the repo rate, which we call the policy rate, as the "only policy tool".
The weighted average funding rate is at 14.72% in its final form. The policy rate remains well below this with 10.25%. The central bank will probably raise the policy rate above this rate, taking into account the continued increase in financing costs. Our expectation is that the policy rate will be brought to 15.75% with a 550 basis point increase. An increase of 550 basis points would appear to be drastic, but in reality create a tightening effect of around 100 basis points in the effective rate.
