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Sell-Side Analysts Bring Forward Emergency Rate Hike Expectations as TRY Crumbles

TURKEY
  • GOLDMAN SACHS SAYS NOW EXPECTS TURKEY TO HIKE INTEREST RATES TO 20% IN Q2 NEXT YEAR, SEES RISKS FOR AN EARLIER MOVE GIVEN ONGOING LIRA PRESSURE - Reuters
  • The mention of FX intervention from the CBRT seems like a backstop for the bank at this point with its back against the wall on delivering rate hikes in the near future against hard opposition from Erdogan and the MHP.
  • Gross FX reserves currently stand around $120bn after improving on a number of FX swap contracts, but their depletion would leave Turkey extremely vulnerable going into a tighter external environment in 2022 with US rates & the USD expected to rise in line with expedited rate hike/taper timelines.
  • More sell-side institutions are now expecting CBRT to hike rates in the 400-600bp range by 2Q22 as the impact of TRY devaluation passes through to CPI metrics – making the recent policy missteps more visibly clear.
  • Capital controls and other unconventional monetary policy measures to curb lira liquidity are also being floated at options among the sell-side, should the CBRT refuse to deliver any emergency rate hikes.
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com

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