'Rational' monetary policies are back, says Turkey's finance chief, as he seeks to stabilize inflation-ridden economy
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Turkey's finance chief, Mehmet Simsek, states that 'rational' monetary policies are back in Turkey after a period of economic adventurism and crises. Simsek, a former Merrill Lynch bond strategist, believes that this shift towards rational policies will stabilize the inflation-ridden economy and make the country's lira debt a sound investment. Despite the high inflation rate of almost 70%, foreign investors are confident that price rises will decelerate rapidly by the end of 2024. The inflow of foreign capital into Turkey has hit a record pace, with portfolio inflows into Turkish assets exceeding $25 billion since the end of March. Simsek is keen to avoid excessive appreciation of the lira, as it would harm Turkish exporters. He believes that a combination of sound policies and structural transformation will regain investor confidence and stabilize the real exchange rate. Banks such as BNP Paribas recommend investors buy short-term lira bonds, which have yields of around 40%. Simsek expects investors to shift into longer-term bonds in the future. However, a complete truce with portfolio investors will only be achieved when inflation starts to slow and Turkey eases restrictions on offshore currency swaps. Turkey is exploring ways to loosen these arrangements for offshore markets, starting with longer-term swaps. The momentum of domestic reform in Turkey will remain in the spotlight for investors, as the country aims to cool the economy and address challenges such as broadening the tax base and combating the shadow economy.



https://fortune.com/europe/2024/05/28/rational-monetary-policies-back-turkey-finance-chief-stabilize-inflation-ridden-economy/