Turkey: CBRT likely to raise its main policy rate by 100bp - Rabobank

Analysts at Rabobank point out that today we have a key interest-rate decision in Turkey, and their EM Strategist Piotr Matys expects the CBRT to raise its main policy rate by 100bp to 18.75% at 12:00BST (13:00CET).

Key Quotes

“After CPI inflation accelerated sharply to 15.4% y-o-y in June, and will continue to rise further given TRY fell to yet another record low against the basket of USD and EUR earlier in July, fuelling inflation expectations.”

“Given that today’s meeting is the first one since the general and presidential elections held in June, a rate hike should ease market concerns about the independence of the central bank. It would also provide TRY with much-needed support.”

“While yet another decisive monetary policy decision would weigh on USD/TRY, scope for a retracement will be constrained by unfavourable external factors, including trade conflict between the US and China and the rising risk of FX wars.”

“Should the CBRT opt to keep rates on hold, the knee-jerk market reaction is likely to be negative with USD/TRY rising sharply towards the all-time high at 4.9743 set on 12 July.”