Turkey: CBRT likely to hike its Late Liquidity Window (LLW) rate by 100bps - TDS

At today’s rate meeting in Turkey, analysts at TDS expect the CBRT to hike its Late Liquidity Window (LLW) rate by 100bps to 12% while they also expect the CBRT to keep the three other policy rates on hold.

Key Quotes

“That is the O/N Borrowing rate remains at 7.25%, the O/N Lending rate at 9.25% and the Repurchase rate at 8.00%. With the Weighted Average Cost of Funds (WACF)  currently just below the LLW rate, we think the CBRT will hike this rate to give them more room to manoeuvre should they want to tighten further in order to defend the currency.”

“The CBRT will be particularly keen to avoid a lira sell-off ahead of the April 16 referendum, but this is the last meeting ahead of the vote. If, as we expect, the LLW rate is hiked by 100bps then this will probably not translate into an immediate comparable increase in the WACF. We think that the CBRT will increase the amount of liquidity available at the O/N Lending rate to limit the increase in the WACF, holding the full 100bps or thereabouts of tightening in reserve.”