- Today, the CBRT hiked rates 475bps to 15%, in line with expectations, and unified policy around the repo rate
- Hike is symbolic, but shift away from corridor is positive and will help restore credibility; TRY up by c2% in response
- Remains to be seen if this is durable shift in policy or if Erdogan will push for lower rates once TRY stabilises
Today, the CBRT, under the leadership of its new governor, Naci Ağbal, hiked the one-week repo rate by 475bps to 15%, in line with the median estimate of 25 analysts surveyed by Bloomberg. It also committed to provide all funding through the one-week repo rate, “which will be the main policy tool and the only indicator for the monetary stance.”
The rate hike is largely symbolic, as the average cost of funding was at 14.8% yesterday and the late liquidity window (the upper band of the rate corridor) was at 14.75%. However, the shift away from Turkey’s convoluted rate corridor system will increase monetary policy transparency and credibility.
Markets have applauded the move, with TRY rallying by over 2% versus the dollar at the time of writing. This brings the rally to c13% since the leadership changes at the central bank and finance ministry the weekend of 7-8 November.
Turkish gold rush (in one chart), 5 October
Charting Turkey’s currency crisis, 21 August
- 1 Macro Analysis/Global Debt sustainability index: Countries at the highest risk of debt distress
- 2 Strategy Note/China 20 best Emerging Market stocks through the pandemic
- 3 Weekend Reading/Ukraine Bitcoin rally to drive central bank digital currency… even before the collapse
- 4 Strategy Note/United States of America Passing the (nuclear) ball—the future of conflict under a Biden presidency
- 5 Strategy Note/Nigeria 9 companies tackling Nigeria’s energy crisis