Is there any surprise decision from the first PPK meeting chaired by Kavcıoğlu? By

© Reuters. – Tomorrow the CBRT will make April and announce its interest rate decision. In the first meeting led by the new President Kavcıoğlu, the policy rate is expected to be kept constant at 19%.

After Ağbal’s dismissal, concerns about a change in monetary policy increased, and Kavcıoğlu said in his statements that there would be no interest rate hike immediately, and this statement increased the expectation that interest would not be cut in April. On the other hand, inflation is expected to reach 18% with the effect of the increase in the exchange rate in March, in addition to the continued increase in inflation and the continued increase in PPI. The idea that no interest rate cut should be made in order to protect the value of the TL against this increase is too much. Kavcıoğlu also gave the message that inflation is a determinant in policy and that a path will be followed in line with the expectations of the markets.

While no interest rate hike is expected in the markets in April, the idea that another rate hike should be made in May according to the outlook in inflation is high, but the decision text for tomorrow will be a guide on how the CBRT looks at the rate hike.

In the Agbal period, the verbal orientation was also preserved by including quite hawkish expressions in the text of the decision. In the text at this month’s meeting “The tight monetary policy stance will be resolutely maintained for a long time.” and “If necessary, additional monetary tightening will be made.” It may increase the expectation that tight monetary policy will continue in the markets.

Adherence to the monetary policy implemented as of November may support the TL to erase some of its loss after the change of chairman. Accordingly, the first pullback below the 8.0 level will be followed.

The most unexpected possibility at the MPC meeting, where Kavcıoğlu will give his first exam, will be an interest increase. In the case of an interest rate hike and a hawkish decision text, a rapid movement may be experienced in TL, but the stability in the decisions taken to reach the MPC meeting levels in March (7.20) will undoubtedly be the most important factor.

Author: Necdet Erginsoy

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