Economy

Turkey’s cenbank to deliver another substantial rate hike to 20%: Reuters Poll

Published

1 year ago

July 18, 2023

Turkey's cenbank to deliver another substantial rate hike to 20%: Reuters Poll

By Ali Kucukgocmen

ISTANBUL (Reuters) – Turkey’s central bank is expected to raise its policy rate by 500 basis points to 20% this week, a Reuters poll showed on Monday, making good on its pledge of further tightening with another sharp hike to curb inflation which is set to rise again.

The central bank raised its policy rate by 650 basis points in June to 15%, while promising to continue tightening until a significant improvement in the inflation outlook is achieved.

The rate hike and the hawkish tone were the strongest signals of a reversal after years of loose policy under President Tayyip Erdogan, who was prioritising growth and investments.

The tightening still remained below expectations, with economists saying that Erdogan’s influence over the central bank limits how far they can go in tightening policy. Real rates are also still deeply negative.

Economists see a further hike this week to 20%, according to the median estimate of 23 economists in a Reuters poll, with forecasts ranging between 17% and 21.50%.

“Anything less than a move to hike the policy rate to 20% will be seen as disappointing and a signal that Erdogan is constraining what (Finance Minister Mehmet) Simsek and (Central Bank Governor Hafize Gaye) Erkan can do,” said Tim Ash of BlueBay Asset Management.

Turkey’s annual inflation surged to a 24-year high of 85.51% last October, mainly due to the constant depreciation of due to Erdogan’s policy of low rates.

Inflation eased to 38.21% by June but is expected to rise again. The year-end forecast stood at 51.50% in the latest Reuters poll, but economists now say it will likely be around 60% after Ankara hiked several tax rates to support its deteriorating budget and as the lira continues to decline.

The central bank was expected to keep hiking rates in coming months, with the median estimate of 13 economists in the Reuters poll for the policy rate at year-end standing at 25%.

The forecasts ranged between 24% and 35%.

The central bank’s one-week repo rate had been slashed to 8.5% from 19% since 2021 under Erdogan’s economic programme. The bank had also used foreign exchange reserves to prop up the lira, which nonetheless plunged to a series of record lows.

As a result of the recent policy reversals, the central bank’s net international reserves rose to $13.17 billion in the week to July 7, continuing to rebound from a record low of $-5.7 billion it touched in June.

The central bank will announce its rate decision at 1100 GMT on Thursday.

Economy

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

Published

12 months ago

December 26, 2023

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.

The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.

Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.

“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.

Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.

“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.

The bank will next convene to set its benchmark rate on Feb. 16.

The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.

Economy

China identifies second set of projects in $140 billion spending plan

Published

12 months ago

December 25, 2023

China identifies second set of projects in $140 billion spending plan

© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo

SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.

With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.

The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.

China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.

The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.

“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.

The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.

($1 = 7.1315 renminbi)

Economy

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

Published

12 months ago

December 25, 2023

Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.

“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.

Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.

“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.

The bank will next convene to set its benchmark rate on Feb. 16.

The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.