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Executive Summary:
- Rates likely unchanged at 14.00%, looking through record inflation
- Committee likely to retain view that disinflation will follow current price rises
- Authorities to lean further on non-monetary policy tools to bolster reserves, stabilize FX
The Turkish central bank are likely to keep policy unchanged at 14.00% this month, as the now-familiar contrast between high inflation and a government pledge to lower interest rates keeps policy in a logjam. Keeping rates unchanged at this stage allows the bank to prevent a further decoupling of inflation expectations via the rates channel, while the government lean more heavily on ex-monetary policy tools to shore up the TRY FX rate and bolster FX reserves.
In the accompanying statement, the bank will likely continue to cite the Russia-Ukraine crisis, high commodity prices and supply constraints as a key driver of price pressures which, once passed, will allow for a wave of disinflation and a return to sustainable prices and financial stability. This reiteration should further bake in market expectations of unchanged policy for the CBRT across the coming months, and possibly into the end of the year, although a number of sell-side analysts see the potential for policy tightening by year-end, as the inflationary impulse persists.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.