Turkey central bank will probably keep rates steady in 2021 – Capital Economics
Turkey’s central bank is expected to leave interest rates on hold at 17 percent throughout 2021, according to London-based economic research and consultancy firm Capital Economics.
A shakeup in Turkey’s economic management team in early November has heralded a shift back to monetary orthodoxy and improved central bank communications, Capital Economics’ Jason Tuvey said in an e-mailed report on Thursday.
Monetary policymakers kept interest rates unchanged on Thursday after hiking them by a total of 6.75 percentage points in November and December.
“Concerns about the faltering economic recovery took priority,” Tuvey said. “But the hawkish tone on inflation supports our view that rates will be unchanged throughout the rest of the year.”
Consumer price inflation (CPI) in Turkey accelerated to an annual 14.6 percent in December from 14 percent the previous month. The central bank’s target for CPI this year is 9.4 percent. That compares with a consensus estimate of 11.2 percent in the bank’s monthly survey of economic expectations.
Capital Economics said it expected the lira to strengthen to 7 per dollar by December from around 7.4 per dollar. The currency lost 20 percent of its value in 2020 after the central bank kept interest rates at below annual inflation to help the government stimulate an economic recovery.
“For now, at least, we remain comfortable that orthodoxy will stick,” Tuvey said