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MNI CBRT Preview - June 2022: Anything But Rate Hikes

Executive Summary:

  • CBRT firmly expected to keep rates unchanged at 14% for sixth consecutive meeting
  • Rate hikes remain an unlikely tail risk, with Erdogan this month reiterating his firm opposition to tighter rates
  • As such, focus remains on macroprudential measures
Full preview including summary of sell-side views here:

MNICBRTPrevJun22.pdf

In the accompanying policy 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.

Instead, the CBRT – in conjunction with banking regulators and the finance ministry - have become more active on macroprudential measures in an attempt to curb loan growth, incentivise Liraization and stem price pressures. These measures vary from tighter conditions for credit card use to adjusting collateral requirements for TRY-denominated bond portfolios.

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