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Goldman Sachs Expect Marginal Lending Rate to Be Introduced at Some Point

TURKEY
  • With regard to the upcoming CBRT meeting, Goldman Sachs say they again feel unable to add value by forecasting the repo rate, a rate that in their view is hard to forecast without guidance from policy makers. They therefore see no reason to disagree with the consensus expectation of 18%.
  • That said, they continue to expect the CBRT to introduce a marginal lending rate at 40% - close to the level of the prevailing deposit rates in the banking sector - to anchor interest rates in the economy and establish an instrument that could be used going forward to target inflation in a more orthodox manner. This view is not based on concrete guidance from the Bank, but rather on their view that such a step is necessary to transition towards a more rational and orthodox policy framework.
  • However, considering that the CBRT did not do this at the last MPC meeting possibly means that the authorities will first want to put other measures in place. Nevertheless, Goldman Sachs think the return to an orthodox framework will eventually require the introduction of such a rate as not doing so will lead to unwanted outcomes.
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