MNI CBRT WATCH: CBRT To Look At Second 250bp Cut In Two Months
MNI (LONDON) - The Central Bank of Turkey will discuss whether to lower interest rates for a second meeting running later this week, with another 250-basis-point cut possible as official measures of inflation and inflation expectations fall.
The CBRT cut its key 1-Week Repo rate by 250bp to 47.5% in December, having raised it to 50% last March, as inflation dropped to 44.38% - broadly in line with the central bank’s year-end target. (See MNI EM CBRT WATCH: 1W-Repo Rate Lowered 250Bps to 47.5%)
Since then, the CBRT’s 12-month-ahead annual inflation expectations survey showed an improvement among market participants of 0.1 percentage point to 27.1%, and of 0.2 percentage point to 47.6% for the real sector, while households’ inflation expectations dropped 1.0% to 63.1%.
In a recent presentation in London, CBRT governor Fatih Karahan said that the underlying trend in inflation is declining, amid easing services inflation, a downwards trend in rent inflation, and “moderate” consumer imports. The share of lira deposits continues to increase against the U.S. dollar, he noted.
Karahan’s tone was echoed by Finance Minister Mehmet Simsek in a social media post which highlighted disinflation, improving inflation expectations, and the government's determination to support central bank efforts. (See MNI EM INTERVIEW: CBRT To Cut 2-3 Times By Feb-Cangoz)
But having carefully managed the last several months of central bank policy manoeuvres and market perception, any cut is likely to be accompanied by Karahan’s reiteration of the central bank’s data-driven, meeting-by-meeting approach as it looks to embed a significant and persistent decline in the inflation outlook.