RIYADH: Turkiye is urging foreign investors to consider government bonds that offer yields in Turkish lira as the country approaches the end of its tightening monetary cycle, according to the central bank’s chief.
Turkish Central Bank Gov. Hafize Gaye Erkan stated that the country is currently approaching economic stability and Turkish lira bonds will yield significant returns, Bloomberg reported, citing Erkan’s interview with Turkish daily newspaper Hurriyet.
“At this time next year, we will be in a more moderate environment in terms of inflation and monetary tightening. I advise foreign investors to seize the opportunity now, as the yields will be lower after this time,” she said.
She indicated that while the stringent monetary policies have started to influence consumer prices, she does not anticipate inflation dropping to single digits until at least 2026.
Following Erkan’s appointment in June, the central bank has implemented a substantial interest rate hike, raising rates by over 30 percentage points to 40 percent.
This announcement comes after a decade where foreign investors largely sidestepped lira-denominated bonds in response to a series of unconventional economic strategies deployed by Ankara aimed at curbing the short selling of the lira.
Highlighting a positive development, the governor pointed out the recent uptick in interest from foreign investors, especially from the US, in Turkish government bonds over the last month.
However, Erkan expressed a preference for direct investments over swap contracts, noting their limited impact on the country’s reserves.
Erkan’s comments come in the backdrop of the Monetary Policy Committee’s announcement last month, suggesting a slowdown and imminent end to the ongoing monetary tightening cycle.
She noted a decrease in the price hikes across various sectors, including automotive, electronics, and furniture. However, she acknowledged that more time is needed to see similar trends in transportation and food.
Erkan also touched upon the persistently high inflation in sectors like education and housing. She highlighted the supply shortages impacting the housing market’s pricing dynamics and shared her personal experience with Istanbul’s increased rental costs.
As of the end of November, Turkiye’s annual inflation rate stood at 62 percent, with the apex bank projecting it to climb to 65 percent by the year’s end and then fall to 36 percent by the end of the following year.
