Standart Chartered:    Substantial rate hikes to continue in Türkiye

  • We now expect the central bank to hike the policy rate by 500bps at its September meeting
  • CBRT to remain focused on rapidly rising inflation and elevated external imbalances in the near term
  • Medium-term economic plan and political ownership confirms near-term commitment to orthodox policy
  • We now forecast the weekly repo rate at 35.00% by year-end (24% prior) on the current turn in policy


CBRT to continue rate-hiking cycle in September

We expect the Central Bank of the Republic of Türkiye (CBRT) to raise its one week repo rate by 500bps to 30% on 21 September, after an above-consensus 750bps hike in August and policy makers’ recent hawkish communication. Our near term policy rate forecast was previously under review. The CBRT has hiked rates by a total of 1,650bps since the appointment of the new governor and the reconstitution of the monetary policy committee; in our view this indicates a commitment to stabilising the economy via monetary policy. We expect this prudent approach to continue amid rising price pressures from domestic and external headwinds (e.g., the global fuel price uptick), Turkish lira (TRY) weakness and rising fiscal imbalances.

Price stability and external-imbalance concerns will remain elevated until yearend. CPI inflation will remain on uptrend driven by rising fuel prices, TRY weakness and fiscal pressures. We expect CPI inflation to increase further in September and be above 60% y/y. The current account returned to deficit in July in line with our expectation (after a one-off surplus in June) and will likely remain under pressure for the rest of this year.


Rising fuel prices, still-robust domestic demand and a seasonal slowdown in tourism related FX inflows in Q4 will have an adverse impact on external imbalances.

We now expect the central bank to proceed aggressively with rate hikes amid clear political support for the policy pivot

The August monetary policy decision and recent unveiling of the medium-term economic plan (MTEP) focused on bringing inflation down through contractionary measures – and indicates a strong commitment to monetary policy orthodoxy. More importantly, explicit support from Türkiye’s political leadership for the economic policy mix and its continuation has led to a change in our expectations of the near-term monetary policy trajectory. We now forecast the weekly repo rate at 35.0% (24.0% previously) by end-2023.

Excerpt from the same-titled research note


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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and and has contributed to the financial daily Referans and the liberal daily Radikal.