Turkey: 300bp rate cut coming? – ABN AMRO

Nora Neuteboom, economist at ABN AMRO, suggests that the Turkish Central Bank (CBRT) will almost certainly ease monetary policy, while the Bloomberg consensus expects a 275bp cut, from 19.75% to 17%.

Key Quotes

“In line with our previous Turkey Watch (Rate cut, recovery and rivalry), we expect a more aggressive 300bp cut, taking rates to 16.75%. As such, we are slightly more dovish than the market.”

“While inflation may temporarily decelerate to around 12% in September and October, we expect it to increase again by end-2019. Despite the fall being short-lived, it nonetheless enables the CBRT to ‘front-load’ some of the easing. Therefore, we expect a 300bp this coming Thursday, and a more modest 125bp cut, in October this year.”

“Over the last couple of days, President Erdogan has increased pressure on the CBRT to lower rates by saying that he wants rates to be back in single digits in the shortest period possible. Given that President Erdogan has a good relationship with the central bank governor, Mr. Uysal, we think such a message will not fall on deaf ears.”