“Fitch” monitors the repercussions of the “mistake” of lowering interest rates...

“Fitch” monitors the repercussions of the “mistake” of lowering interest rates...
“Fitch” monitors the repercussions of the “mistake” of lowering interest rates...
An official at the credit rating agency Fitch on Friday described Turkey’s sudden big interest rate cut this week as “another step in the wrong direction” and that the agency was monitoring how much damage the measure could do to bank and corporate finance.

Eric Arispi, senior Turkey director at Fitch, told Reuters that the easing of monetary measures was a premature step, and appeared to be politically motivated without leaving the central bank with the margin needed to protect the faltering lira.

The central bank cut the key interest rate to 16% from 18% on Thursday, despite inflation reaching nearly 20%, sparking a wave of rapid selling of the lira, whose value has fallen to new record levels.

“For us, the focus is now on knowing to what extent this move in the wrong direction of (monetary) policy, or this premature monetary easing, can lead to reduced external financing of the economy, especially for banks and companies,” Arespi said during the interview.

“If this is the case, this could lead to continued international pressure on the reserves for a while,” he added.

He added that although net foreign exchange reserves have risen since April from less than $10 billion, it “does not leave much room for the central bank to build a very strong defence” to defend the currency if necessary.

Fitch revised Turkey’s outlook to “stable” from “negative” in February while keeping the rating at “BB-“, a month before President Recep Tayyip Erdogan dismissed the central bank governor and replaced him with Shihab Kavcioglu, who shares his unorthodox view that High interest rates cause inflation.

inflation expectations

Wall Street bank JPMorgan said it expects Turkey’s central bank to cut interest rates by another 100 basis points in November and sharply raise its inflation forecast.

“Such initial easing indicates that lowering inflation in a rapid manner is not a policy priority,” JP Morgan’s Yarkin Sebeshi said in a note to clients.

“We fear that this step will only enhance price pressures, and we have revised our inflation forecasts to 19.9 percent for this year and to 16.4 percent in 2022,” he added.

JPMorgan had previously forecast that inflation would reach 16.7 percent by the end of 2021.

(Reuters)

These were the details of the news “Fitch” monitors the repercussions of the “mistake” of lowering interest rates... for this day. We hope that we have succeeded by giving you the full details and information. To follow all our news, you can subscribe to the alerts system or to one of our different systems to provide you with all that is new.

It is also worth noting that the original news has been published and is available at saudi24news and the editorial team at AlKhaleej Today has confirmed it and it has been modified, and it may have been completely transferred or quoted from it and you can read and follow this news from its main source.

PREV Gold rises as the dollar falls and the focus is on...
NEXT Japan’s economy shrinks 3.6% in the third quarter of 2021

Author Information

I have been an independent financial adviser for over 11 years in the city and in recent years turned my experience in finance and passion for journalism into a full time role. I perform analysis of Companies and publicize valuable information for shareholder community. Address: 2077 Sharon Lane Mishawaka, IN 46544, USA Phone: (+1) 574-255-1083 Email: [email protected]