All change at the CBRT likely lead to a prioritization of rate cuts - TDS

In the view of the analysts at TD Securities, the dismissal of the Turkish central bank’s (CBRT) Governor Cetinkaya by President Erdogan is likely to prompt the central bank to cut the interest rates.

Key Quotes:

“In Turkey, the dismissal of CBRT Governor Cetinkaya and replacement with Deputy Governor Uysal will likely lead to a prioritization of rate cuts. We think this will pressure Turkish markets.

Government and presidential interference with the CBRT is in full swing.

At the next MPC meeting on 25 July, we will likely see the CBRT ease rates. The quantum remains unknown to us, but we think anything between 150bps and 300bps. But we see a significant risk that the market will perceive such decisions as politically motivated, rather than driven by the inflation dynamic.

Therefore, a potentially very different market reaction is to be expected, with likely adverse implications.”