FED and CBRT Meetings May Cause Volatility on USD

FED and CBRT meetings may cause volatility on USD. Interest rate decisions will be announced this week.

The FED interest rate decision will be announced on Wednesday, March 17 at 9 pm, and the FED Chairman Jerome Powell's speech will take place at 9:30 pm. The FED, which cut interest rates a year ago due to the coronavirus epidemic and started purchasing assets and switched to an expansionary monetary policy, is not expected to make changes in interest rates and asset purchases.   What to Expect from the FED Meeting? While the employment market is the most important item, the issue of how the accepted $ 1.9 trillion package will affect employment is important. On the side of inflation, even if the latest figures do not indicate a rapid increase, the expectations in the markets are increasing and the rise in the 10-year bond interest is accelerating accordingly. Even though Powell made clear enough statements on this issue, the markets ignored Powell this time and volatility reached a year high in the last 3 weeks. It was stated that Powell's being more dovish than his previous statements on this issue could relieve the markets. Another important point is whether the FED has taken concrete steps against high inflation risk. Parallel to this, change and planning in asset purchases are therefore important.   Interest Rate Increase Is Expected from CBRT On Thursday, March 18, the CBRT will announce the Monetary Policy Decision at 2 pm. The bank, which increased the interest rate by 200 bp in December, left the policy rate unchanged at 17 percent in the last two meetings. This month, the center is expected to increase interest rates by at least 100 bps. Inflation, which was 14.97 percent in January, rose to 15.61 percent in February, and volatility was observed in foreign exchange. It is said that a further increase in inflation is expected due to the increase in foreign exchange, especially the dollar rate, to PPI and CPI, albeit with a delay. It is stated that the center is expected to raise interest rates by 100 basis points this month, against the risk of deterioration in inflation and interest rates, which are currently at breakeven, with the next month's rise. The center, which implements a tight monetary policy, is expected to use verbal guidance strongly as well as increase interest rates. It is stated that in case of an increase in interest rates above market expectations, positive movements may be seen in TL as the first reaction. It is said that if the CBRT does not increase this month, the pressure on the TL may increase. Based on these, the opinion is shared that in both cases the interest rate decision will create some volatility on the exchange rate.