Crédito y Caución (Atradius) | The government and the Central Bank returned to more orthodox economic policies in H2 of 2020. Between September and December 2020 the Central Bank tightened the benchmark interest rate several times, by 875 basis points in total, to 17%. Despite this hike, inflation remains stubbornly high (15.6% in February 2021), and is expected to only gradually decrease in the coming months, due to persistent expectations of high inflation and ongoing price pressure triggered by a weak lira exchange rate. In mid-March 2021, the benchmark interest rate was raised again, by 200 basis points, to 19%. However, President Erdogan dismissed the governor of the Central Bank immediately after – the third dismissal of a governor in less than two years.
turkey central bank
Scope Ratings | The dismissal of central bank governor Naci Ağbal worsens the crisis of confidence in Turkey’s monetary policy, further undermining macroeconomic stability. This is credit negative for Turkey’s B/Negative sovereign ratings. Saturday’s announcement of the sudden change in central-bank leadership, shortly after a market-friendly, above-expectation 200bp tightening of rates on Thursday, underlines Recep Tayyip Erdoğan’s wish for looser monetary policy in support of unsustainably high growth.
Last week the Central Bank of Turkey raised its interest rate to 10.25% (compared to 8.25% previously). The Turkish lira recovered by 1% briefly against the euro and the dollar, but soon retook its downward trend. However, the move did give an unexpected boost to BBVA. Through its subsidiary Garanti, Turkey has become the Spanish bank’s third largest market by volume. BBVA’s shares shot up 5.3% (2,284 euros). A few days earlier, BBVA shares had recorded their minimum annual level of 2.16 euros
Intermoney | Other risks to which we must pay attention are those arising from emerging markets. In this case, one should not focus only on one country, as there are numerous fronts open. For example, the latest update to the IMF forecasts cut the growth forecasts for Argentina and Brazil, stressing the more difficult finanacial conditions and the need for adjustments to the Argentinian economy while, in the case of Brazil, it stressed the effect of strikes and political instability.