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

Analysts at TDS and the unanimous consensus expect the CBRT to keep all its rates on hold, with, in particular, the Late Liquidity Lending Rate remaining at 12.25.

Key Quotes

“The CBRT has kept the WACF at around 12% since early May, about 370bps above its level at the start of the year. August CPI inflation numbers were pretty awful, with headline inflation at 10.68% and core at 10.16%.  However, base effects combined with recent TRY strength should help bring headline inflation down by the year-end, albeit well-above the CBRT’s  forecast of 8.7%.”

“Even if the CBRT’s de facto inflation target were more like 7-8% rather than the stated 5%, we think it is hard to argue that current policy is really that tight. However, the fact that the CBRT has managed to tighten as much as it has done reflects the fact that political pressures for lower rates have eased as growth has accelerated. We expect the press statement to be pretty much unchanged from the previous one, with the MPC reiterating that “tight stance in monetary policy will be maintained until inflation outlook displays a significant improvement”.  That said, we think that the next move in rates will be down, with easing commencing in December rather than October which was our previous forecast.”