Turkey’s central bank implemented a hike in its key rate by 650 basis points to 15pct, signaling a reversal of President Tayyip Erdogan’s previous policies. However, the rate increase fell short of expectations, leading to a decline in the value of the Turkish currency.
Following the rate hike, the Turkish currency experienced a substantial depreciation, reaching an all-time low against the USD, surpassing 24.60.
The central bank’s policy committee emphasized its commitment to further tightening in a timely and gradual manner until significant improvement in the inflation outlook is achieved.
Annual inflation in Turkey was just below 40pct in May, having peaked at over 85pct in October of the previous year. The central bank anticipates additional inflationary pressures, further necessitating its tightening measures.
The Turkish currency depreciation has been a persistent issue, with a 44pct loss in 2021 and a 30pct decline in the previous year, despite the central bank’s efforts to counteract foreign exchange demand using its reserves.
As a result of the recent policy reversal and currency volatility, several steel producers, including Bastug and Icdas have suspended their rebar sales. Kardemir has also announced the closure of their billet sales.
The uncertainty stemming from the policy changes, coupled with the upcoming Eid holidays, has led steel mills to temporarily halt their sales. This break will provide them with an opportunity to assess the market situation and make informed decisions upon their return, according to the market participants.
