Turkey: CBRT cuts benchmark rate with 325 bps – Nordea


Morten Lund, analyst at Nordea Markets, notes that in Turkey, the CBRT cut its benchmark rate with 325 bps, once again demonstrating its lack of independence.

Key Quotes

“Despite the relatively large cut, the market reaction has been positive. We, however, keep our structural negative view on the TRY.”

“At today’s meeting, the Turkish central bank (CBRT) decided to lower its one-week repo rate for a second consecutive meeting. This time the cut amounted to 325 bp compared to 425 bp in July. The key rate now stands at 16.50%.”

“The sequence of cuttings is a direct consequence of President Erdogan’s frustration with interest rates being too high, which led to the sacking of the now former CBRT governor, Murat Cetinkaya, and the appointment of former deputy, Murat Uysa. In essence, the development in Turkey over the past months clearly cements our view that the central bank will never be truly independent under Erdogan’s reign.”

“As such, today’s rate cut of 325 bp could appear dovish on the surface, but the TRY reacted positively with gains of almost 1% against the EUR. In our view, this somewhat odd pricing behaviour can be attributed to i) unconventional measures not being introduced ii) a “relieve” reaction given the extreme range of cut projections iii) markets being positioned for more aggressive cuts than expected by economists and iv) market participants believing in a more benign inflation outlook (CBRT said year-end inflation could be below their forecast of 13.9%).”

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

Latest Forex News

Editors’ Picks

EUR/USD hits fresh weekly highs, nears 1.0900

The greenback is in trouble as government bond yields keep falling to record lows spurring gears of recession. Risk-off exacerbated by coronavirus spreading worldwide.

EUR/USD News

USD/JPY pierces 110.00 as fear rules

Wall Street is sharply down for a second consecutive day while US Treasury yields stand at record lows, reflecting investors concerns and backing yen gains.

USD/JPY News

Dollar domination set to continue, with or without coronavirus fears

The coronavirus-related fall in US bond yields has been weighing on the US dollar. Nevertheless – and despite worries coming from Markit's PMIs – the greenback is set to gain more ground.

Read more

Gold: Pares early losses, still in the red below $1650 level

Gold extended previous day's intraday retracement slide from multi-year tops and witnessed some follow-through long-unwinding trade on Tuesday.

Gold News

FXStreet launches Real-Time Trading Signals

FXStreet Signals offers access to explanatory live webinars, real-time notifications when signals are triggered and exclusive membership to the company’s Telegram group, where users get direct guidance by our analysts and get room to discuss and interact.

More info

Forex MAJORS

Cryptocurrencies

Signatures