Turkey’s central bank: To hike or not to hike? – Danske Bank

Senior Economist, Vladimir Miklashevsky at Danske Bank, expects Turkey’s central bank (TCMB) to hold the benchmark repo rate unchanged on 24 January as political pressure to keep the economy growing prevails.

Key Quotes

“A 50-100bp ‘cosmetic’ hike is still likely.”

“We expect the TRY’s fast devaluation to be halted via different legislative and monetary tools, although rating agency Fitch’s possible downgrade of the country rating could restart the sell-off.”

“The TRY has been hit by a perfect storm of negative domestic developments and foreign factors, including a stronger USD, higher oil prices (affecting the current account negatively) and higher US yields.”

“We see USD/TRY at 3.95 in 1M, falling further to 4.15 in 3M, 4.25 in 6M, while increasing to 4.50 in 12M.”