Turkey: A flimsy move by the central bank - Natixis

Inna Mufteeva, Research Analyst at Natixis, notes that the Central Bank of Turkey left the key interest rate on one-week repo operations unchanged at 8.0% amid inflationary pressures from the recent currency depreciation and rising food prices.

Key Quotes

“The overnight lending rate was increased by 75 bps to 9.25% (widening the overnight corridor to 200bps) and the late liquidity window lending rate passed from 10% to 11%.”

“The absence of the upward move on the key rate was surprising, considering the unfavorable outlook for price developments. The CBRT acknowledged, however, that the weakening in growth and domestic demand could support disinflation.”

“Monetary tightening should continue in the months to come as inflation accelerates mainly on the lagged pass-through effects from currency depreciation. However, the CBRT is likely to stick to its indirect tools leaving the key rate untouched for some time.”