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23 Feb 2015
CBRT poised to cut rates by 50bp tomorrow – TDS
FXStreet (Barcelona) - Paul Fage, Senior Emerging Markets Strategist at TD Securities, expects the CBRT to cut its benchmark repo rate by 50bp to 7.25% in tomorrow’s MPC meeting, expecting further cuts if inflation continues to fall.
Key Quotes
“At tomorrow’s (24 February) MPC meeting we expect the CBRT (Central Bank of Turkey) to cut its benchmark repo rate by 50 bp to 7.25%. The median consensus expectation is for a 25 bp cut, although 8 out of the 18 economists surveyed expect a cut of 50 bp or more.”
“We also expect the Overnight Borrowing and Lending rates to both be cut by 50 bp, bringing them down to 7.0% and 10.75% respectively.”
“We think that the CBRT will cut the benchmark repo rate by 50 bp, this representing a compromise between political pressure on the one hand, and being able to present the move to the markets as being ‘measured’ on the other.”
“We think a cut of 25-50 bp is pretty much priced into the FX market. Anything more than a 50 bp cut will cause USDTRY to rally, while if the CBRT remains on hold then we expect USDTRY to fall.”
“For the Xccy swap curve we expect a cut of more than 50 bp to lead to a steepening of the curve, with rates as a whole probably rising in response to the rally in USDTRY. If the CBRT remains on hold then we expect the curve to flatten with rates as a whole probably rallying in response to a weakening USDTRY.”
“Looking forward, as headline inflation continues to fall, we expect some further cuts after tomorrow’s 50 bp.”
Key Quotes
“At tomorrow’s (24 February) MPC meeting we expect the CBRT (Central Bank of Turkey) to cut its benchmark repo rate by 50 bp to 7.25%. The median consensus expectation is for a 25 bp cut, although 8 out of the 18 economists surveyed expect a cut of 50 bp or more.”
“We also expect the Overnight Borrowing and Lending rates to both be cut by 50 bp, bringing them down to 7.0% and 10.75% respectively.”
“We think that the CBRT will cut the benchmark repo rate by 50 bp, this representing a compromise between political pressure on the one hand, and being able to present the move to the markets as being ‘measured’ on the other.”
“We think a cut of 25-50 bp is pretty much priced into the FX market. Anything more than a 50 bp cut will cause USDTRY to rally, while if the CBRT remains on hold then we expect USDTRY to fall.”
“For the Xccy swap curve we expect a cut of more than 50 bp to lead to a steepening of the curve, with rates as a whole probably rising in response to the rally in USDTRY. If the CBRT remains on hold then we expect the curve to flatten with rates as a whole probably rallying in response to a weakening USDTRY.”
“Looking forward, as headline inflation continues to fall, we expect some further cuts after tomorrow’s 50 bp.”