Goldman Sachs Economists' Assessment of CBRT and Interest Rate Policy

Goldman Sachs economists Clemens Grafe and Başak Edizgil stated that the CBRT's early return to repo auctions harbors downside risks for interest rate forecasts.

Effects of Returning to Repo Auctions

In an August 24 evaluation written by economists Clemens Grafe and Başak Edizgil, it was stated that the CBRT returned to repo auctions earlier than the bank had anticipated.

The report noted that this development points to downside risks for this year's interest rate forecast and that the process is being closely monitored.

Balance of Payments and Dollarization

The ongoing deterioration in the underlying trend of the balance of payments was cited by the economists as posing a more structural problem.

Even though this situation does not necessarily require the Turkish Lira to lose value more rapidly, it is seen as likely to necessitate keeping the policy rate high for a longer period in order to keep dollarization under control.

Inflation Risks and Reserve Status

The report specifically emphasized that inflationary risks stemming from higher energy prices persist.

At the same time, the absence of significant dollarization pressure, the continuation of inflows into TL deposits, and the re-strengthening of CBRT reserves were welcomed positively.

Outlook for Short-Term Risks

It was stated that, thanks to current economic indicators and the recovery in reserves, short-term risks to the program continue to remain relatively limited.

In light of all these developments, the economists noted that they maintain their current views regarding interest rates for this year.