20 Feb 2015
Lower rates looming in Turkey? – TDS
FXStreet (Edinburgh) - In the view of Paul Fage, Senior EM Strategist at TD Securities, the likeliness of a rate cut by the CBRT at next week’s meeting is gathering traction amongst traders.
Key Quotes
“At present the focus of the CBRT and politicians is on the headline inflation rate and we think this will be the main driver of interest rate policy”.
“However, the only modest decline in the core inflation rate shows that there is a high level of underlying structural inflation”.
“This suggests that once the disinflationary effects of lower oil prices and moderating food price inflation have played out, headline inflation and hence interest rates could head back up again very quickly”.
“The attention of the markets now switches to the regular MPC meeting on 24 February. We think the MPC will almost certainly cut rates, but will try to adopt a measured approach and cut the benchmark repo rate by just 50 bp”.
“However, the political pressure for greater rate cuts will be strong and we see the risks skewed towards more rather than less than 50 bp in cuts”.
Key Quotes
“At present the focus of the CBRT and politicians is on the headline inflation rate and we think this will be the main driver of interest rate policy”.
“However, the only modest decline in the core inflation rate shows that there is a high level of underlying structural inflation”.
“This suggests that once the disinflationary effects of lower oil prices and moderating food price inflation have played out, headline inflation and hence interest rates could head back up again very quickly”.
“The attention of the markets now switches to the regular MPC meeting on 24 February. We think the MPC will almost certainly cut rates, but will try to adopt a measured approach and cut the benchmark repo rate by just 50 bp”.
“However, the political pressure for greater rate cuts will be strong and we see the risks skewed towards more rather than less than 50 bp in cuts”.