BofA raised its inflation and dollar forecasts for Turkey

BofA

Bank of America Securities (BofA) economists have revised their inflation forecasts upward in their report on Turkey. Due to the depreciation of the lira, a 34% increase in the minimum wage, and increases in special consumption tax (ÖTV) and value-added tax (KDV) rates, the year-end inflation forecast for 2023 has been raised from 44% to 58%. It is predicted that inflation will peak at 65% in May of next year.

According to Bloomberg’s report, the economists, who also shared their expectations with the Central Bank of Turkey (TCMB), stated that there could be an interest rate hike of up to 500 basis points this week, saying, “There may be an increase between 300 and 500 basis points. We believe that the TCMB will gradually implement the transition in order not to unexpectedly harm the economy. The duration of interest rate hikes is uncertain. We expect the policy rate to be at 35% by the end of the year.”

The institution also announced that its year-end USD/TRY forecast is 31.

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