[...] all but three of the 25 economists surveyed by Bloomberg. The rest predicted a cut. The MPC has stood pat since an increase of 625 basis points
[…] all but three of the 25 economists surveyed by Bloomberg. The rest predicted a cut. The MPC has stood pat since an increase of 625 basis points in September.
â€œIt is too early to expect the central bank to ease monetary policy,â€ Piotr Matys, a London-based strategist at Rabobank, said before the announcement. â€œThe main reason is insufficient stability of the Turkish lira as observed since the end of March.â€
Having laid the groundwork for a softer stance in April, Governor Murat Cetinkaya now has to contend with risks far outside his […] two weeks, compounded by tensions with the U.S., could plunge Turkey into renewed turmoil as the economy struggles to heal after a currency crash last summer.
Investors already anticipate the Turkish currency will remain among the worldâ€™s most unstable, with its three-month implied volatility the highest globally. The lira traded stronger against the dollar after the rate decision, extending the best […] past month.
If sustained, gains in the lira may eventually be enough to prompt policy makers to cut rates in the coming months, especially now that a slowdown in inflation is becoming entrenched. Adjusted for prices, rates in Turkey are about double the level among peers such as Russia and South Africa.
The case for monetary easing in Turkey is also improving thanks to the dovish turn by global central banks. The Federal Reserve and the European Central Bank are sounding more open to stimulus, while their counterparts in India and Australia already cut rates.
For now, inflation remains more than triple the official target of 5%, limiting the central bankâ€™s options as the lira faces a choppy outlook. Treasury and Finance Minister Berat Albayrak is more upbeat, predicting price growth will be in single digits in September to October after slowing for a second month in May.
A rate cut this week would have been premature, according to Kubilay Ozturk, an economist at
Deutsche Bank AG (DE: DBKGn ) whoâ€™s ranked by Bloomberg as the most accurate forecaster of Turkish rate decisions.
Monetary easing is more likely in the second half â€œas further disinflation in the pipeline would make them less concerned about the impact of their policy actions on the lira,â€ he said before the rate announcement.