Goldman Sachs reported that the risk of the Turkish currency being exposed to sharp fluctuations and policymakers having to raise interest rates further, has increased after the central bank kept its benchmark rate unchanged.
“We believe that the risks of a sharp decline have increased following today’s decision,” said Murat Onur, an analyst at the American bank, referring to a possible scenario in which the central bank would delay tightening monetary policy, leading to more currency fluctuations and hence higher interest rates and a contraction in demand.
He explained that the levels of deficit in the current account balance and the payment of private sector debts indicate the continued displacement of funds from the economy, pointing out that this puts pressure on the currency and foreign exchange reserves.
“Policymakers will have to address these issues, and we still see that the interest rate will rise to 17 percent by the end of the year, but the timing will ultimately be dictated by the performance of the Turkish lira,” he added.
Source: “Reuters”
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