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MS See Continued Pressure on TRY Adding to Upside Inflation Risks

  • MS flag the phrasing in yesterday's CBRT policy statement, writing that the statement mentioned that new steps will be taken on collateral and liquidity policies to strengthen liraisation.* MS think that this could be related to recent news which reported that the CBRT will increase from 5% to 15% the discount rate applied to assets other than local currency government bonds used as collateral in funding operations.
  • It could also be referring to the introduction of a new 3-month TRY repo funding facility (in addition to the 1-week repo funding) to incentivise the use of lira collateral in funding.
  • The statement does not signal a tightening in the overall monetary policy stance despite the mention of additional measures. Hence, they see continued pressure on the lira adding to upside risks on inflation and expect some normalisation in real rates, either through the introduction of a new CPI-indexed bond, or an upward adjustment to deposit rates.
MNI London Bureau | +44 203-865-3809 |
MNI London Bureau | +44 203-865-3809 |

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