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Turkey: MPC to keep the benchmark one-week repo rate on hold – TDS

In line with the unanimous consensus, analysts at TD Securities are expecting that the Turkey’s MPC to keep the benchmark one-week repo rate on hold at 24.0% at today's MPC meeting.

Key Quotes

“Since the October meeting there have been some positive developments in Turkey regarding the inflation outlook. The Turkish lira has appreciated by 5% against the US dollar and oil prices in lira terms have fallen by about 25%. This has helped CPI inflation, which peaked at 25.2% Y/Y in October, fall back to 21.6% in November. However, we do not think that the MPC would dare to cut rates, as this would run the risk of triggering a new lira sell-off.”

“For the same reason the monetary policy guidance in the press statement is likely to remain pretty much unchanged, stating that "tight stance in monetary policy will be maintained decisively until inflation outlook displays a significant improvement".”

“The MPC could possibly remove the clause "and, if needed, further monetary tightening will be delivered", indicating a neutral stance on rates, but that again would run the risk of triggering a lira sell-off for no obvious benefit.”

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