Turkey: CBRT calls the market's bluff - TDS

Paul Fage, Senior Emerging Markets Strategist at TD Securities, notes that at yesterday's meeting the MPC kept all its policy rates on hold even as TDS and the consensus had expected a 100bps hike.

Key Quotes

“According to the press statement, the CBRT thinks that, given the slowing economy, it has done enough tightening, but that it is prepared to maintain a tight policy for some time.”

“Yesterday's decision was something of a litmus test for CBRT monetary policy. The market was hoping for a signal that the CBRT could still exert its independence under the new presidential system, but they did not get it.”

“We think the risks for Turkish assets remain skewed to the downside and think that the CBRT will probably be forced to hike rates again at the September meeting or even earlier.”