23 May 2014
CBoT cut its refi rate - BTMU
FXStreet (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ, observed the CBoT is reversing its last emergency rate hike.
Key Quotes
"The Central Bank of Turkey even judged yesterday that it now has some scope to begin reversing the aggressive emergency monetary tightening which was delivered at the end of January. The CBoT’s actions proved successful at helping to stabilize the lira which has since retraced most of its sharp sell off which was recorded between December 2013 and January 2014."
"The CBoT decided yesterday to lower their benchmark repurchase rate by 0.50 point to 9.50% citing reduced uncertainty and a decline in Turkey’s risk premium as the main justification for the move. The CBoT also stated that it will maintain a tight monetary policy stance until there is a significant improvement in the inflation outlook."
"Inflation is soon expected to peak although it remained elevated at 9.4% in April, and is now expected by the CBoT to be at 7.6% by the end of 2014. With the real policy rate adjusted for inflation only just in positive territory now further CBoT monetary easing would leave the lira more exposed if financial market conditions were to become more volatile again. However, current low volatility conditions still remain supportive for carry currencies like the lira in the near-term."
Key Quotes
"The Central Bank of Turkey even judged yesterday that it now has some scope to begin reversing the aggressive emergency monetary tightening which was delivered at the end of January. The CBoT’s actions proved successful at helping to stabilize the lira which has since retraced most of its sharp sell off which was recorded between December 2013 and January 2014."
"The CBoT decided yesterday to lower their benchmark repurchase rate by 0.50 point to 9.50% citing reduced uncertainty and a decline in Turkey’s risk premium as the main justification for the move. The CBoT also stated that it will maintain a tight monetary policy stance until there is a significant improvement in the inflation outlook."
"Inflation is soon expected to peak although it remained elevated at 9.4% in April, and is now expected by the CBoT to be at 7.6% by the end of 2014. With the real policy rate adjusted for inflation only just in positive territory now further CBoT monetary easing would leave the lira more exposed if financial market conditions were to become more volatile again. However, current low volatility conditions still remain supportive for carry currencies like the lira in the near-term."