Turkey: CBRT to keep all its rates on hold today

In its monetary policy decision due later today, the Central Bank of the Republic of Turkey (CBRT) is expected to keep all of its key interest rates on-hold today, noted Annette Beacher, Chief Asia-Pac Macro Strategist at TDS.

Key Quotes:

“TRY In line with the unanimous consensus we expect the CBRT to keep all its rates on hold today. In particular, the Late Liquidity Window (LLW) rate will be held at 12.75%. But we do anticipate the chance of a more relaxed message on inflation from the CBRT, which would in turn hint at the possibility of lowering rates later in the quarter.

When the CBRT announced rates last time, on 14 December, inflation was at its peak in the current cycle, with the last available print, November CPI, standing at 13% Y/Y. The CBRT must have heaved a sigh of relief when December CPI came in at 11.9%, the first slowdown since July 2017. Further slowdown is possible and likely in the coming months as base effects become more favorable.

In particular, large-scale TRY depreciation that occurred in the November 2016 to January 2017 period will start fading in the year-on-year comparison. A new bout of currency weakness, however, took hold again in September-November 2017, which is already translating in marginally higher inflationary pressures than would have otherwise been visible. This and risks of second-round effects will continue to keep inflation skewed to the upside and above target.”

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