MNI CBRT Review - October 2023: Hiking Cycle Retains Momentum

Executive summary:

• The CBRT delivered a 500bp increase to the one-week repo rate, taking the policy rate to 35%.
• Among sell-side, consensus was firm for another large-scale increase following an identical move in September.
• Regarding alternative measures to manage financial conditions, the CBRT said again that the simplification process will continue to be gradual.

See the full preview, with a summary of sell-side views, here:

MNICBRTRevOct23.pdf

There were very few changes in the CBRT’s policy statement compared to the September edition. The central bank said once again that monetary tightening will continue to be gradually strengthened to the extent necessary until a significant improvement in the inflation outlook is achieved, citing rising oil prices as an upside risk to inflation. Perhaps the most notable adjustment to statement was the specific mention of external risk: “geopolitical developments pose risks to the inflation outlook due to oil prices.” – though the increase in oil prices had been mentioned previously.

Regarding alternative measures to manage financial conditions, the CBRT said again that the simplification process will continue to be gradual. On Friday morning, the CBRT announced a series of measures to further encourage the conversion of FX deposits into TRY accounts: “Changes will be made to the practice of charging commissions on reserve requirements for FX deposits in order to increase the share of Turkish lira through the renewal of FX-protected accounts… The target rise for the share of real persons’ Turkish lira deposits, which was set at 2.5 percent, will be increased to 3.5 percent.”