Higher Likelihood of an Early Election Implies Higher Rates for Longer

A Turkish court's decision to annul the main opposition party's leadership congress has increased the likelihood of early elections. Consequently, Goldman Sachs expects the central bank to maintain higher interest rates through early 2027.

Key Takeaways

• 1.A court ruling annulling the opposition party's 2023 congress has increased political volatility and the likelihood of an early election in Turkiye.
• 2.Economic pressures, including a widening current account and global price shocks, provide additional incentives for the government to hold elections sooner rather than later.
• 3.Goldman Sachs has pushed back its expectation for rate cuts, now forecasting the TCMB to remain on hold until Q1-2027.

Table of Contents

• What happened
• Implications
• Exhibit 1: Cross-Currency Rates Rose Sharply Initially But Have Since Fallen Again
• Exhibit 2: The Current Account Balance Is Falling Meaningfully
• Disclosure Appendix
• Global product; distributing entities
• General disclosures

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