CBRT: Risks of serious policy missteps are high - TDS

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 19, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Córdoba) - Today the central bank of Turkey (CBRT), as expected, left interest rates unchanged. According to analysts from TDS, today’s statement points toward a net easing but with the risk of policy missteps so high, risks of TRY weakness could force the CBRT to hike rates.

    Key Quotes:

    “At today's MPC meeting, the CBRT kept all its policy rates on hold. That is the Repo Rate was held at 7.5%, the O/N Lending Rate at 10.75%, and the O/N Borrowing Rate at 7.25%. This was in line with our and the consensus expectation.”

    “Today’s statement strengthens our suspicion that the CBRT wants, probably for political reasons, the first step towards policy simplification to represent a net easing. Since they think—in our view correctly— that current market conditions do not allow this, they did nothing today.”

    “We think that the risks of serious policy missteps by the CBRT are high, given their current assumption that policy is currently tight enough and, implicitly, that the next more in rates is down. We think there is a real risk that TRY weakness will ultimately force the CBRT, albeit reluctantly, to hike rates.”

    “We are forecasting 250 bps of hikes this year, although there is a fair degree of uncertainty in our minds about when they will actually take place, and USDTRY at 3.20 by end-Q1 and 3.40 by year-end.”
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