MNI CBRT Preview - May'24: Rates Sufficiently Tight For Now

Executive Summary:

• With rates already at 50.00%, the CBRT will likely feel that financial conditions are sufficiently tight
• Macroprudential measures targeting credit growth should aid the impact of the higher policy rate
• Bank have made clear that they are committed to holding rates at a higher level for longer

MNICBRTPrevMay24.pdf

The Bank’s attempts to normalise the market’s perceptions of policy are beginning to play out, with Simsek’s leadership at the economy ministry influencing not only the more hardline stance on inflation, but also the unveiling of a landmark public savings package last week. While markets wait for further details on fiscal consolidation, signs are emerging of an improvement in foreign investor sentiment toward Turkey. Foreign investor portfolio flows have begun to turn toward Turkey, with Ekonomi writing last week that foreign capital inflow to Turkey amounted to $13.6bln and is set to continue as economic concerns subside. Meanwhile, signs of the impact of credit tightening measures are bearing fruit at a micro level. Dunya wrote last week that furniture firms were beginning to have trouble selling goods on credit, with payments restricted to 2-3 months, from 9-12 months, prompting a 20-35% decline in domestic sales.