Chance for a Rate Hike amid Economic Growth of Turkey

The economy of Turkey has been rising at a faster rate more than any other large economies in the world since the household spending and exports increased. Consequently, this could induce the central bank for a rate hike to control the effect of inflation.

The Gross domestic product rose by 11.1 percent in third quarter compared last year, which has been the quickest rate in more than six years, based on the official report on Monday. According to the poll from Bloomberg, the economist forecasted an 8.5 percent median estimate.  

Turkey spent more on wages and investments and continued cheaper credit to companies to offset the unsuccessful attempt of a coup last year. However, domestic consumption influenced mainly the growth when inflation has been the highest since 2003 where there is a high chance for the central bank to tighten the monetary policy in the meeting on Thursday, according to an economist from Nomura International Plc in London. He said that the factors that drive this growth has pushed the lira down in the past few months, despite of the positive overall picture

A rate hike would oppose the course of the President Recep Tayyip Erdogan in November to prevent inflation as his “unorthodox view: when it comes to lower borrowing costs to counter price increase.

On the other hand, the Deputy Prime Minister Mehmet Simsek mentioned that an economic growth that is relative only to domestic demands is not “sustainable which has to be balanced out if necessary.

The growth for the third quarter is not an overly outstanding figure which he said during the interview with the local television company. He said that the country has to have reform about 5.5 percent to 6.5 percent growth that is sustainable because the growth has been in three months to September last year.

Following the report,  the Turkish Lira changed its trend. Looking back, the Economy Minister Nihat Zeybekci mentioned on November 26th that the country will have a fast growth rate globally in Q3.