CBRT: Door Open for Further Easing? – Rabobank
Strategist at Rabobank Piotr Matys sees the possibility that the CBRT
could loose further its monetary conditions in the medium term horizon.
Key Quotes
“We have been arguing for a while that the Central Bank of the Republic of Turkey (CBRT)
may narrow its interest rate corridor by lowering the overnight lending
rate instead of raising the overnight borrowing rate, which has been
the predominant view in the market”.
“This symbolic rate cut not
only marks yet another small step in simplifying the CBRT’s unorthodox
monetary policy, but perhaps more importantly it indicates that the bias
is gradually shifting toward policy easing over the mid-term horizon”.
“The key factor that allowed the CBRT
to narrow its corridor is a far more stable lira. The currency and
local assets are benefitting from an improvement in global demand for
risk, driven by expectations that the Fed will not hike rates
aggressively; China’s commitment to prevent significant CNY
depreciation; and a comprehensive stimulus package revealed by the ECB
in March”.
“We maintain our view that USD/TRY
should continue to trade well below the all-time high of 3.0752, which
should give the CBRT more room to manoeuvre. EUR/TRY’s path of the least
resistance should be down as TRY is a high yielder and EUR is one of the main funding currencies”.
(Market News Provided by FXstreet)
