This week, on the 24th of August, the Turkish Central Bank will set the policy rate, the consensus view is a 250 basis point hike, which will leave the policy rate at 20%. I think this is already priced into the market, but a hike of more or less than 250 basis points can move the markets significantly. A higher interest rate would most likely cause a dip, while a lower hike or a stand could cause a rally. However, evaluating the result of policy moves in Turkey is more complicated than that, as the new orthodox monetary policy plays a big role in creating investor confidence.
The interest rate decision will be followed by the quarterly growth data on the 29th, which could be stalling, following China and the rate hikes, the probability of a recession is there because of the rapid rate hikes in recent months. How strong the Turkish economy is will be a focal point for the markets.
Also, the roadmap will be set for the next three years, and it will be an important indicator of whether the government will keep on with the mini-china strategy that they have set for Turkey, by devaluating the currency and keeping rates low. This is very unlikely though, after the monetary policy pivot.
Comments