Interim Economy Minister Nihat Zeybekci said the depreciation of the Turkish lira is temporary and dollar-lira parity will start to fall in October.
Speaking in a televised interview, Zeybekci said the Turkish lira lost value in parallel with the dollar index until June and entered a negative period after June. The Turkish lira experienced an additional 7.5 percent loss when compared to the Japanese yen and the euro, and he claimed the Turkish lira will rise with the emergence of a clearer picture after the Nov. 1 general elections. Underlining that the overvalued dollar is not sustainable for the U.S. economy, Zeybekci said the speculative margin on the Turkish lira will disappear by itself.
Commenting on interest rates, Zeybekci said the real sector tolerates a 14 percent interest rate, but it is high cost. "I think it is temporary," he said, adding that the Central Bank of the Republic of Turkey's (CBRT) intervention in exchange rates is not necessary and discussions about interest rates should indicate a downward trend.
In reference to the CBRT's independence, Zeybekci said the bank is independent in terms of instruments, but not in terms of politics.
Meanwhile, Goldman Sachs revised its estimations about the Turkish lira and policy interest rates, indicating that they will experience more moderate deprecation in 2016. Pointing to the fact that the Turkish lira has entered a sharp fall zone with sharp declines in recent weeks, Goldman Sachs said in a report on Thursday that exchange rates will normalize to some extent in 2017 in parallel with basic macro indicators. It estimated that Turkish lira will reach TL 3.6 to the dollar in the face of the currency basket including the dollar and euro over the next 12 months. It also said the currency basket will reach TL 3.38 at the end of 2016 and TL 3.25 at the end of 2017.
Goldman Sachs also revised its estimation about interest rates, and said the CBRT will respond to over depreciation of the Turkish lira with more aggressive and front-end interest rate hikes. It predicted the CBRT will increase its one-week indicator repo interest rate to 12 percent and 14 percent in 2016 and 2017, respectively.