Rate h kes

Dünya Executive - - REPORT - W ll am Jackson, econom st, Cap tal Econom cs

The Turk sh government is starting to exert pressure on the central bank not to raise interest rates.Indeed, policymake­rs at the central bank faced similar pressures before they raised interest rates in early 2014 and again in early 2017. And they are likely to be concerned by current double-digit rates of inflation, the recent sharp rise in inflation expectatio­ns and the impact of lira weakness on the high levels of foreign currency debt in the private sector. As a result, we now think an interest rate hike at the next MPC meeting on April 25 looks more likely than not. We have pencilled in a 100 basis points hike in the late liquidity rate, to 13.75 percent. And if the MPC doesn’t tighten policy, history suggests that the fall in the lira will gather pace in the immediate aftermath of the decision, which could force policymake­rs to hold an emergency meeting to raise rates. (Apr l 11)

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