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British Barclays’ analysis on Türkiye: Currency, interest rates, and inflation

British Barclays' analysis on Türkiye: Currency, interest rates, and inflation A branch of Barclays Bank is seen, in London, Britain, February 23, 2022. (Reuters)
By Newsroom
Jun 19, 2024 4:21 PM

Barclays, a major British bank, has published a new analysis regarding Türkiye. The bank mentioned the possibility of a controlled depreciation in the Turkish Lira (₺) and predicted that interest rates would remain stable throughout 2024. Barclays also forecasted an end-of-year inflation rate of 46.5%.

Currency and interest rate dynamics

In its recent analysis focusing on Türkiye’s exchange rate, interest rates, and inflation, Barclays attempted to address questions about the potential rise in the dollar, the status of interest rates, and the expected inflation rate by the end of the year.

Insights from Barclay’s economists

Barclay’s economists, including Ercan Erguzel, suggested that a controlled depreciation could occur in the Turkish lira. They stated, “We expect authorities to allow a slight weakening of the TL during the summer, as maintaining a fixed exchange rate for an extended period poses a risk of widening the current account deficit. Nevertheless, we anticipate better performance from the TL in the coming quarter.”

Stability in interest rates

The bank also evaluated the Central Bank’s interest rate policy, projecting that interest rates would remain unchanged throughout 2024.

Potential impact of wage increase on interest rates

In a note released on Wednesday, Barclays mentioned that if there is an announcement of a wage increase in the second half of 2024, the Central Bank of the Republic of Türkiye (CBRT) could consider a 250 basis point increase.

Assessment and forward-looking statements

The report included assessments such as, “If inflation falls below 50% before the end of the year and consecutive monthly CPI (Consumer Price Index) moderates towards 1%, the CBRT may consider initiating an easing cycle earlier, possibly in November or December.”

Barclays’ inflation forecast

Barclays also made an inflation forecast for Türkiye, predicting that inflation would reach 46.5% by the end of the year.

Last Updated:  Jun 20, 2024 3:18 PM