CBRT expected to ease further this week – TDS

Strategists at TD Securities see the Turkish central bank lowering its key rates at its meeting this week.

Key Quotes

“Wednesday we expect the CBRT to cut its O/N Lending Rate, currently at 10.5%, while keeping the other policy rates on hold i.e. the Repo Rate at 7.5% and the O/N Borrowing Rate at 7.25%”.

“The more difficult question is deciding how much they will cut. The lira has been fairly stable since the March MPC meeting when the O/N Lending Rate was cut by 25 bps”.

“Furthermore headline inflation fell sharply in March to 7.46% Y/Y from 8.78% in February. Because of this we are inclined to think that the CBRT will go for a 50 bps cut in the O/N Lending Rate, bringing it to 10.0%, although there is a significant chance of the CBRT just cutting by 25 bps”.

“The consensus is also looking for a 50 bps cut in the O/N Lending Rate with the Repo Rate and the O/N Borrowing Rate both kept on hold”.

“However, 7/21 of respondents to the Bloomberg survey are forecasting only a 25 bps cut in the O/N Lending rate”.

“We maintain our view that recent inflation performance does not justify rate cuts as core inflation and longer-term inflation expectations remain too high”.