Moody's upgrades Turkey's outlook to positive, acknowledging decisive shift in monetary policy

Turkey's economy: Moody's has revised Turkey's outlook from stable to positive attributing the change to a decisive shift in the country's monetary policy. Since President Tayyip Erdogan secured re-election in May, Turkish authorities have abandoned their unorthodox low-interest-rate policy, opting for a sharp policy tightening.

The ratings agency highlighted that this policy pivot enhances the prospects of bringing down Turkey's currently high inflation rates to more sustainable levels. Moody's expressed confidence that the change in monetary policy is indicative of regained credibility and effectiveness.

"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," stated Moody's in its assessment.

Turkey's annual inflation rate surged to 64.77 per cent in December, sustaining an upward trend expected to continue in the coming months, notably influenced by a substantial increase in the minimum wage.

Despite the positive outlook, Moody's has maintained Turkey's ratings at "B3," reflecting a cautious optimism in the wake of the recent policy changes. The revision indicates a recognition of the decisive steps taken by Turkish authorities to address economic challenges, setting the stage for potential improvements in the country's economic performance.

(With Reuters inputs.)