News

According to the central bank governor, Turkiye’s lira bonds are poised to generate favorable returns.

Turkish Central Bank Governor Hafize Gaye Erkan is encouraging foreign investors to explore government bonds denominated in Turkish lira as the country approaches the final stages of its tightening monetary policy cycle. According to Erkan, Turkiye is nearing economic stability, and Turkish lira bonds are expected to offer substantial returns. She emphasized the importance of seizing the current opportunity, as yields are projected to decrease in the future.

Erkan suggested that although the stringent monetary measures have begun to impact consumer prices, she anticipates inflation will not drop to single digits until at least 2026. Since assuming office in June, the central bank, under Erkan’s leadership, has implemented significant interest rate hikes, raising rates by more than 30 percentage points to 40 percent.

This announcement follows a decade where foreign investors largely avoided lira-denominated bonds due to Ankara’s unconventional economic strategies aimed at stabilizing the currency. Erkan noted a recent increase in interest from foreign investors, particularly from the US, in Turkish government bonds over the past month.

However, Erkan expressed a preference for direct investments over swap contracts, citing their limited impact on the country’s reserves. Her remarks coincide with the Monetary Policy Committee’s recent suggestion of a slowdown and potential conclusion to the ongoing monetary tightening cycle.

Erkan highlighted a decrease in price hikes across various sectors such as automotive, electronics, and furniture, though she acknowledged that transportation and food sectors may require more time to exhibit similar trends. She also addressed persistent high inflation in sectors like education and housing, attributing it to supply shortages impacting housing market dynamics.

As of November’s end, Turkiye’s annual inflation rate stood at 62 percent, with projections indicating a rise to 65 percent by year-end and a subsequent decrease to 36 percent by the end of the following year.

Leave a comment

Your email address will not be published. Required fields are marked *