May 24, 2024 08:16 GMT
MNI CBRT Review - May'24: Fresh Measures Head Off Liquidity Risks
Fresh liquidity measures target concerning re-acceleration of FX loan growth
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EXECUTIVE SUMMARY:
- The Central Bank of Turkey left its one-week repo rate unchanged at 50%
- Statement maintains its commitment to higher-for-longer rates amid resilient domestic demand and upside inflationary pressure
- Beyond the headline policy rate, the bank made sweeping changes to liquidity provisions, punishing banks that exceed 2% FX loan growth and raise reserve requirements
Full review including summary of sell-side views here:
The fresh measures should go a long way in re-asserting the transmission mechanism across H2, allowing for a further improvement in policy credibility across the rest of the year.
May’s policy statement retained references to hawkish risks to the outlook, specifically highlighting the increase in consumption goods imports and the subsequent impacts on the current account balance - not only a key indicator for the central bank but a major measure with which Simsek is gauging the success of his policies aimed at financial stability, reducing risk premia on Turkish assets over time.
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