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.
Executive Summary:
- CBRT surprised the market by announcing a 100bps cut in the repo rate, decreasing the benchmark rate to 13% (vs. unchanged exp.)
- This decision goes against the 'Liraization' strategy as it pushes real yields to deeper negative territory and could therefore continue to weigh on the TRY in the medium term
Link to full review:
Yesterday, the CBRT surprised the market by announcing a 100bps cut in the repo rate, decreasing the benchmark rate to 13% (vs. unchanged exp.). This decision goes against the 'Liraization' strategy as it pushes real yields to deeper negative territory and could therefore continue to weigh on the TRY in the medium term. We have seen that the economies with deep negative real rates have seen their domestic currency depreciate sharply this year. TRY is the worst performing currency among the EM world, down nearly 27% against the US Dollar. With an annual inflation rate at 80%, Turkey offers by far the ‘deepest’ negative real yield (-63%, left frame).
Following the decision, Monetary Policy Committee Governor Kavcioglu said that it would also “further strengthen the macroprudential policy set” to reinforce its monetary-policy transmission mechanism and it singled out the spread between its rate and those offered at commercial banks.
Source: Bloomberg/MNI
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.