© Reuters. People shop at a fresh market in Istanbul, Turkey July 5, 2023. REUTERS/Dilara Senkaya/File Photo
LONDON (Reuters) – Wall Street bank JPMorgan (NYSE:) revised both its growth and inflation outlooks for Turkey upwards after the central bank delivered a smaller-than-expected interest rate hike on Thursday.
JPMorgan forecast that full-year economic growth would stand at 4% by year-end rather than the previously expected 3.2%. Meanwhile, inflationary pressures have intensified in July due to ongoing lira depreciation and tax hikes and wage hikes, JPMorgan analyst Fatih Akcelik said in a note to clients, adding he now expected year-end inflation to stand at 57% rather than 50%.
Inflation was expected to peak at 64% in May 2024 due to unfavourable base effects in prices and pre-election stimulus, Akcelik added.
“We maintain our year-end policy rate forecast at 30%, and we still expect a 250 bps (basis point) hike at each meeting by the end of the year.”
Turkey’s central bank hiked its policy rate by 250 bps to 17.5% on Thursday, continuing to reverse President Tayyip Erdogan’s low-rates policy as it promised more tightening and said it would support it with additional measures.
