Consensus still divided on CBRT decision today – TDS

Annette Beacher, Macro Strategist at TD Securities, noted the opinions on today’s interest rate decision by the Turkish central bank (CBRT) stay quite divided.

Key Quotes

“There is a lot of uncertainty surrounding today’s CBRT rate announcement. Whether the MPC decides to keep all rates unchanged or hikes the Late Liquidity Window (LLW) rate by, say, 50bps to 12.25% is anybody’s guess; consensus expectations are more or less evenly split”.

“We inclined to go for no change in the LLW, but have nearly as many reasonable arguments in favour of a hike. The chief reason why we believe that the CBRT could decide to hold is that the decision is never entirely free from political influence”.

“This time, after the successful referendum on the constitutional reform, is probably no exception. Chief advisors to President Erdogan have already started to anticipate lower rates, which is an expectation we also have for the future”.

“But with the WACF only 25bps below the hard ceiling of the LLW, we may see a repeat of the 16 March announcement (when the WACF–LLW differential had shrunk to 20bps) when the CBRT hiked 75bps. So we think today’s decision is near a coin toss. As for policy rates other than the LLW, we are highly confident that none will be changed; this is in line with the consensus”.