F nally, a bolder move

Inna Mufteeva, econom st, Natxs

Dünya Executive - - REPORT -

Given the decision [to raise rates by 75 basis points] we expect the CBRT to wait for the longer term impact on the exchange rate and on the financial market’s perception­s which implies a status quo on key rates for the next monetary policy meeting or even until June elections. Indeed, the Turkish lira kept depreciati­ng over past months, losing more than 7 percent against the USD since the beginning of the year and more than 16 percent since September 2017. It has recently breached the psychologi­cally important threshold of 4 and now seems to mainly drive price pressures and, thus, the

CBRT decisions. Political developmen­ts, including the recent announceme­nt by President Recep Tayyip Erdogan of the snap elections in June, as well as above-potential growth (at 7.4 percent in 2017) boosted by the fiscal stimulus, weighed on the Turkish lira over the last year. As such, the pass-through effects of the TRY depreciati­on and the rise in food and energy prices pushed inflation to double-digit figures with the peak of 13 percent reached in November 2017. Meanwhile, markets’ reaction to the decision appears positive with the TRY gaining around one percent following the press release. However, the longer term impact of the rate hike remains to be seen which is why we don’t expect any additional strong moves from

CBRT in the near future. (April 26)

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