Goldman Sachs Group Inc. will refrain from a forecast of its own for Turkish interest rates on Thursday after its economists said they’d “incorrectly argued” for a different direction in policy.
(Bloomberg) — Goldman Sachs Group Inc. will refrain from a forecast of its own for Turkish interest rates on Thursday after its economists said they’d “incorrectly argued” for a different direction in policy.
Days ahead of this week’s meeting, analysts at the Wall Street bank said in a report they “feel unable to add value by forecasting the repo rate, a rate that in our view largely determines the size of subsidies to priority sectors and is hence hard to forecast without guidance from the policy makers.”
The arrival of President Recep Tayyip Erdogan’s new economic team has led to market cheer and expectations of a swift pivot from a period of ultra-low rates. But it’s also created a stark divide among economists.
Before Governor Hafize Gaye Erkan’s first rate meeting in June, the gap between the lowest and highest forecasts was a stunning 26 percentage points. While policymakers eventually delivered Turkey’s first rate hike in more than two years, it underwhelmed the market by bringing the one-week repo rate to 15% from 8.5%.
Goldman economists including Basak Edizgil expected the central bank to introduce a marginal lending rate close to the 40% level used by lenders in the market for retail deposits. The idea was to have “a policy rate that anchors rates in the economy,” they said in the report.
The guidance from policymakers so far has been for a “gradual” monetary tightening cycle.
That still leaves too much to the imagination, with economists surveyed by Bloomberg submitting rate forecasts for this week’s policy meeting ranging from 17% to 20%.
While dissenting over the direction of Turkish monetary policy, Goldman says the median call of around 18% sounds about right. “We therefore also see no reason to disagree with the consensus expectation,” Goldman’s analysts said.
–With assistance from Harumi Ichikura.
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