Turkish Lira Was Supressed After CBRT Decision

Turkish Lira was supressed after the CBRT Decision. The USD/TL exchange rate increased from 8.03 to 8.15.

The MPC meeting of the Central Bank of the Republic of Turkey (CBRT) took place today. In line with the market expectations, the CBRT did not change the policy rate and kept it unchanged at 19 percent. The CBRT removed the statement “if necessary, additional monetary tightening will be made” from the decision text and stated that the policy rate will continue to be set at a level above inflation. After these phrases were removed from the decision text, the USD/TL rate rose from 8.03 to 8.15. Turkey's credit default risk premium (CDS) advanced around 423 basis points, while Turkey's 2-year benchmark bond rate stood at 18.14 percent.

Markets Shared The Opinion That The Interest Rate Will Be Fixed

In the expectation surveys conducted by different institutions, the common view was that the CBRT would be patient with the interest rate at 19 percent. In the interest survey conducted by Bloomberg HT with the participation of 26 institutions, the median expectation was that the policy rate would be kept constant at 19 percent, while only one institution predicted a 100 basis point increase in the survey, and the expectation of 25 institutions was that the CBRT would pass this meeting. The expectation of foreign institutions was that the interest would be kept constant. In its research report, Deutsche Bank stated that, at the Monetary Policy Board meeting of the Central Bank of the Republic of Turkey to be held this week, the board will keep the policy rate at 19 percent, even though the board is more dovish than the previous board. MUFG Bank analysts also stated in a research note they published that they expect the Central Bank of the Republic of Turkey to keep the interest constant.