According to reporting by Reuters, JPMorgan expects Turkey’s central bank to hike interest rates to 25% from the current 8.5% at its June meeting, adding this could come with forward guidance suggesting smaller hikes ahead if needed.
Reuters reports that according to a note Nicolaie Alexandru-Chidesciuc wrote to clients stated: “We maintain our year-end policy rate forecast at 30%, with risks on the upside,”
Additionally, JP Morgan expects Turkey to tip into a recession in the second half of the year.
“We forecast a recession in 2H23 on the back of a tightening in credit conditions.”
June 22nd meeting will be the new appointee Hafize Gaye Erkan’s first as Central Bank President; replacing Şahap Kavcıoğlu as the 4th appointee since 2019. Recent post-election appointment of Mehmet Şimşek as Minister of Treasury and Finance signaled to many as the end of President Eroğan’s “unorthodox economic policies” in light of Turkey’s devastated economy and depreciating currency.
Since 2021, President Erdoğan has insisted on continuously cutting policy rates from a high of 20% to the current 8.5%. Consequently, in the last two years, the Lira has dropped from 8.5 to the dollar to the current 23.65. Although the historic crash of the Lira was somewhat slowed down by implementation of several extreme measures, it has been unsuccessful in halting its demise.
The hiring of Şimşek was taken by many as a return to orthodox economics as Şimşek had previously served as the economy czar between 2007 to 2009; a period where the Turkish economy had experienced an average 7.5% annual growth rate. The new Central Bank President Erkan however, is still an unknown entity as she has not previously held a position in the central bank.
