Turkey: Easing to continue – TDS

The CBRT will announce interest rates at its regular meeting on Wednesday, 22 April. Economists at TD Securities expect more easing while the USD/TRY pair trades at 6.9396.

Key quotes

“We forecast a 75bps reduction of the benchmark repo rate to 9.00%, slightly more aggressive than the consensus' -50bps. It is hard to see a bottom in rates at the moment.”

“In 2020, we expect consumer price inflation to fall to 9% y/y, 3ppt lower than our pre-coronavirus forecast. Given our inflation forecast, the policy rate should be set no lower than 10%. Inflation rebounding to 11% next year suggests rates at a minimum 13%.”

“TRY depreciation will be slower than in the past and mitigated by favorable factors such as low oil prices and tiny margins for FX swaps with foreign counterparts, but the fundamental pressure for a weaker currency will remain in place.”