Now Is Not the Right Time to Downsize!
The CBRT has finally announced its decision and hiked rates by 250-bps as expected. In their press release, central bank officials said that there will not be rate cuts anytime soon, at least not until before inflation starts to decline.
As far as I could I understand from the press release is that the Central Bank
will not raise rates any further, but that it might tighten the monetary policy if necessary, and it will not wait for inflation to go down to cut interest rates, but will wait for a glimmer of hope that inflation could ease. In light of that statement, I could say that rate cuts might start before September.
Accordingly, it might be wise, in terms of risk management, for creditors to provide loans with a maturity longer than one year at the current interest level to businesses with good ratings before the CBRT lowers rates. And it might be advisable for those who want to restructure their loans to wait until summer, if they are not in a rather tight financial situation. If the impact of the Red Sea crisis on freight rates and shipping costs does not lead to a new wave of inflation, the Fed and the ECB might reduce interest rates in the last quarter.
Of course, interest rates could move towards an upward trajectory again depending on global inflation trends. If interest rates climb up again, all business and financial plans would have to be made over again. So, my advice for lenders is to be selective in loan placement, especially when granting long-term loans. As for borrowers, they should be patient in terms of funding needs and will not reject any loan they can access.
This is not the time to protect yourself by downsizing. Whether you are a credit institution or a real sector business, if you can manage your costs efficiently, you need to keep growing. Just ensure that you have effective debt collection strategies and that each work done or each loan provided comes back to you as an added value.