Turkey: Political turmoil will force CBRT to remain on hold – TDS

By FXStreet FXStreet (Delhi) – Paul Fage, Senior Emerging Markets Strategist at TD Securities, expects the CBRT to keep all its policy rates on hold in tonight’s MPC meeting, i.e. the benchmark Repo Rate to remain at 7.5%, the Overnight Lending Rate at 10.75%, and the Overnight Borrowing Rate at 7.25%. This is in line with the consensus.

Key Quotes

“Inflation well above target and moving up: August CPI inflation came out at 7.14% Y/Y, ahead of the consensus 6.86% and up from the prior 6.81%. Core inflation also moved up in August to 7.66% from a prior 7.31%. Furthermore, since the August MPC meeting the Turkish lira has weakened by about 3.5% against the US dollar and almost 6% against the euro.”

“…but politics means that rates will stay on hold: However, given the extreme political sensitivity of the issue of interest rate policy, we see little chance of the CBRT hiking, at least until the November elections are out of the way. Indeed recent MPC press statements seem to only consider the possibility of rates moving down. While they state that a cautious monetary policy will be maintained, they also say that “future monetary policy decisions will be conditional on the improvements in …read more

Source:: FX Street