Barclays sticks to Turkey terminal rate forecast of 35% by October

LONDON, June 22 (Reuters) – Barclays analysts confirmed they still expected Turkey’s key interest rate to hit a peak of 35% by October following a smaller-than-expected interest rate hike on Thursday, but said risks were “clearly to the downside”.

Turkey’s central bank (CBT) hiked its key rate by 650 basis points to 15% earlier in the day and said it would go further in a reversal of President Tayyip Erdogan’s policy, although the post-election tightening missed expectations and sent the lira and the country’s international bonds lower.

“The CBT will release its quarterly inflation report at the end of July and Governor Erkan will hold a press briefing during this event,” Barclays’ Ercan Erguzel said in a note to clients, adding a briefing with the governor in the wake of the report could provide more colour about hiking and simplification plans.

“Regarding the hiking cycle, we still maintain our terminal policy rate call of 35% by October 2023. However, we now need 5pp hikes (up from 2.5pp hikes in our previous call) in each of the next four meetings.”

Reporting by Karin Strohecker, editing by Elizabeth Howcroft

Our Standards: The Thomson Reuters Trust Principles.