Normalization. The government is monitoring the bond market shock and stresses at every opportunity that the budget cannot go bust, despite tight monetary policy and natural disasters. Athens acknowledges that the road to normalization is long and that even an investment-grade rating from S&P this month is not enough. [EPA]
Ratings agency S&P on Friday raised Turkey’s rating to “B+” from “B”, saying the external rebalancing will improve coordination between monetary, fiscal and income policies.
The credit measure comes a week after Turkey’s central bank kept its policy rate unchanged at 50 percent.
Turkey’s central bank, which announced a 500 basis point interest rate hike in March, said on Friday that inflationary pressures remained present.
The central bank has raised interest rates by 3,650 basis points since June last year.
The ratings agency said it may consider upgrading Turkey’s sovereign rating if policymakers can curb inflation, restore confidence in the Turkish lira, reduce the current account deficit and reverse dollarization.
“We believe that inflation is [Turkey] By 2028, it will fall to single digits,” the agency said in a statement.
Turkey’s consumer price inflation rose to 69.8% year-on-year in April, official data released on Friday showed, slightly below expectations but the highest since late 2022, driven by big increases in education, restaurant and hotel prices.
S&P maintained its “positive” outlook on Turkey but said it could revise it if continued currency weakness or a shift away from anti-inflation policies increased pressure on Turkey’s financial stability and broader finances. [Reuters]
