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TURKEY: Drop in Banking Stocks May Have Been Catalyst Behind CBRT Action

TURKEY
BulletEM BulletEmerging Market News
  • Note that the overnight lending rate (raised from 44% to 46%) is distinct from the one-week repo rate (unchanged at 42.50%) – which is the CBRT's main policy rate. The move follows the significant turbulence across Turkish markets yesterday on the back of the arrest of Istanbul mayor Ekrem Imamoglu.
  • While TRY and the benchmark Borsa Istanbul stock index have been relatively steady during Thursday’s session, the Borsa Istanbul Bank Index has declined a further 8% today, bringing total losses for that index to around 19% on the week, which may have been the trigger behind the CBRT’s action. Following the latest measures, TRY briefly swung into the green versus the greenback, but has since returned to unchanged levels on the day.
  • The CBRT also note that the “monetary policy stance will be tightened in case a significant and persistent deterioration in inflation is foreseen” – a hawkish line of guidance which has not been present in recent policy statements.
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  • Note that the overnight lending rate (raised from 44% to 46%) is distinct from the one-week repo rate (unchanged at 42.50%) – which is the CBRT's main policy rate. The move follows the significant turbulence across Turkish markets yesterday on the back of the arrest of Istanbul mayor Ekrem Imamoglu.
  • While TRY and the benchmark Borsa Istanbul stock index have been relatively steady during Thursday’s session, the Borsa Istanbul Bank Index has declined a further 8% today, bringing total losses for that index to around 19% on the week, which may have been the trigger behind the CBRT’s action. Following the latest measures, TRY briefly swung into the green versus the greenback, but has since returned to unchanged levels on the day.
  • The CBRT also note that the “monetary policy stance will be tightened in case a significant and persistent deterioration in inflation is foreseen” – a hawkish line of guidance which has not been present in recent policy statements.