Moody’s revises Turkey’s outlook to positive on decisive change in economic policy

(Reuters) – Moody’s on Friday revised Turkey’s outlook to positive from stable, citing the decisive change to the country’s monetary policy.

Since President Tayyip Erdogan won re-election in May, authorities have abandoned the unorthodox low interest rate policy in favour of a sharp policy tightening.

The ratings agency said the policy pivot now improves the prospects for bringing down the country’s currently very high inflation rates to more sustainable levels, the agency said.

“While headline inflation is likely to rise further in the near term, there are signs that inflation dynamics are starting to turn, indicative of monetary policy regaining credibility and effectiveness,” Moody’s said.

Turkey’s annual inflation rate climbed to 64.77% in December, sustaining an upward trend that is expected to continue in coming months after a big rise in the minimum wage.

The agency maintained Turkey’s ratings at “B3”.

(Reporting by Vedant Vinayak Vichare in Bengaluru; Jonathan Spicer in Turkey; Editing by Shailesh Kuber)