Turkey: CBRT cuts deep and promises more – TD Securities

Analysts at TD Securities note that the CBRT's MPC has today cut interest rates by 325bps.

Key Quotes

“The cut was widely unticipated by us and the market, though the magnitude was difficult to forecast. We had anticipated a 400bps cut in the repo rate, on the back of anticipated sharp drop in inflation and political pressure for lower rates.”

“While it is difficult to produce an accurate measure of what the market implies at any time, our model was suggesting yesterday that the market was expecting around 300bps of easing, slightly more than the Bloomberg consensus of -275bps.”

“The market, however, may have well been priced for more, or have adjusted for further easing between yesterday and today, as the positive TRY reaction seems to suggest. In fact, USDTRY dropped immediately after the announcement, empirically confirming that the market had expected deeper cuts, as we did.”