Turkey: CBRT to keep all its rates on hold - TDS

In line with the unanimous consensus, analysts at TDS expect the CBRT to keep all its rates on hold today.

Key Quotes

“In particular, the Late Liquidity Window (LLW) rate will remain unchanged at 12.25%; the benchmark repurchase rate will remain at 8.0%; and the O/N lending and borrowing rates will remain at 9.25% and 7.25% respectively. Since the June MPC meeting, headline inflation has fallen from 11.7% Y/Y to 10.9% in June and core from 9.4% to 9.2%. The lira has been reasonably stable against the US dollar, weakening by just 1%. However, we think it is too early for the CBRT to start easing, and indeed the press statement accompanying the June MPC meeting said that the “tight stance in monetary policy will be maintained until inflation outlook displays a significant improvement.”

“We had previously expected that political pressure for lower rates combined with the fall in the inflation rate could prompt the CBRT to start easing policy as soon as this week’s meeting. The political pressure clearly persists, but the relatively strong performance of the Turkish economy helps the CBRT resist this pressure. However, we expect the economy to slow towards the end of this year as the impact of government stimulative measures wanes. Given somewhat lower inflation by then, we are now forecasting the CBRT to start easing around October.”