At a scheduled meeting of the Turkish Central Bank’s (TCMB) Monetary Policy Committee tomorrow, following presidential and parliamentary elections last month, economists expect a hike in interest rates to address high inflation and the Turkish lira’s low valuation against the US dollar.
According to a recent Reuters poll, experts foresee a hike of around 1-1.25 percent in interest rates.
Victorious in the elections on June 24, President Recep Tayyip Erdoğan appointed his son-in-law, former Energy Minister Berat Albayrak, to the economy’s top post, a decision that caused a record loss in the lira and sparked discussions of Turkey’s future financial policies.
The lira had plunged after a visit by Erdoğan to London in May during which he made clear his intention to tighten his grip on the economy and to lower interest rates. Former Deputy Prime Minister Mehmet Şimşek later dialed back Erdoğan’s words during a visit to London, in an attempt to convince financial circles of the TCMB’s independence.
The TCMB has raised interest rates by 5 percent since April.
Newly appointed Treasury and Economy Minister Albayrak also recently signaled the central bank would be independent and “as effective as never before” during the his term in office.
“For foreign investors, Turkey will never be that cheap again,” Albayrak said at a meeting in Argentina with economy ministers from the G20 countries this weekend, referring to the Turkish lira’s low value.
Albayrak also posted a tweet on his personal account showing a meeting with economists and experts to determine a monetary policy for the new term.
As of today, the lira’s valuation to the dollar is around 4.74, which rebounded from 4.80 after a statement by US President Donald Trump indicating that a high value currency would weaken a country’s competitive power in the global market.
According to Mahfi Eğilmez, a former Turkish Treasury bureaucrat, given the current numbers, the TCMB had no need to hike interest rates, but recent record inflation forced the bank to reconsider the numbers.