Can Turkey’s Rates Hold at 37%? BBVA’s Latest Forecast

Turkey’s Central Bank may keep rates at 37% through December 2024, a scenario that introduces fresh uncertainty into markets. This finding, highlighted in BBVA Research’s latest report, also shapes the shadow cast by the OVP (Special Asset Portfolio) plans.

New Echoes of Interest Rates

■Holding %37 by December 2024 aligns with an inflation outlook around 20%.

■OVP’s 2% growth target could dampen investor risk appetite if rates stay high.

■The Central Bank’s “sustainable growth” stance supports a %35–%38 rate band.

OVP’s Shadow and Market Dynamics

■OVP aims to reach 200 billion TL by 2025, targeting a 30% increase.

■A high‑rate environment may lift bond yields while boosting equity volatility.

■Forecasts suggest USD/TRY could swing 8–12%.

Ripple into Credit Markets

■Commercial credit growth could slip from 1.5% to 0.8%.

■A 3.5% tightening in SME lending might reduce the overall credit portfolio by 12%.

■Policy shifts could add a 15% cost to banks’ liquidity management.

Anticipated Scenarios and External Impacts

■If inflation drops to 18%, rates could trim to 35%.

■A faster OVP growth could trigger a 20% rise in credit demand.

■The Central Bank may use “flexible” language to guide markets.

Markets will view this as a balancing act between the pressure of sustained high rates and the expected impact of OVP. Tightening in credit, especially for SMEs, will strain financial health and could slow long‑term growth.