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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.
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Free AccessMNI CBRT Review - August 2021: Stage Set For September Showdown
Executive Summary:
- Rates left unchanged at 19.00% (as expected)
- No changes in phraseology or hawkish rhetoric, despite rapidly rising CPI
- CBRT re-affirmed its commitment to keeping interest rates above inflation until its disinflationary target is met
- The market took this at face value as a hawkish signal with TRY assets rallying in the aftermath, but broadly ignored the fact that Kavcioglu is likely to be dismissed should he follow through on any tightening
- Risks to TRY instability & Kavcioglu's potential removal in September/October are now unequivocally higher with the August CPI number ultimately dictating whether the CBRT tightens against Erdogan's wishes or not – this is where Erdogan's level of influence over policy direction will become abundantly clear
Overall, the statement remained little changed in terms of phraseology on pricing dynamics and commitments to "decisively keep rates above inflation until the significant fall in the Inflation Report's forecast path is achieved." This soothed market nerves of a premature cut at the meeting, but has ultimately boosted the likelihood of near-term instability in both the lira and potentially even CBRT leadership. The post-announcement rally in TRY assets came broadly from an unwind in dovish expectations and somewhat overly ambitious expectations that the CBRT will follow-through on promises to tighten policy in September when CPI rises above the 1wk repo rate. This meeting was a relatively well-telegraphed result, with inflation still below the 1-wk repo (only by -0.05%) making it an easy decision for Kavcioglu to hold rates steady. This, however, will not be the case in September with the sell side expecting CPI to rise to +/- 19.5% until November.
To read the full story
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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.