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29 Jan 2014
Flash: Turkey hikes rates at emergency meeting - Danske Bank
FXstreet.com (Barcelona) - Christin Tuxen, Senior Analyst at Danske Bank notes that at midnight the Turkish central bank (TCMB) at an emergency monetary policy meeting announced an aggressive tightening of monetary conditions and notably hiked its overnight interest rate by 425bp, i.e. from 7.75% to 12%.
Key Quotes
“The TCMB is responding to the recent sharp sell-off in the Turkish lira, which has pushed inflation expectations well above the TCMB’s official 5% inflation target.”
“This very aggressive move – we had expected a raise of some 200-300bp – is clearly positive for TRY but is, at the same time, likely to have quite negative ramifications for the Turkish economy and growth is likely to take a further downturn.”
“Thus, it is questionable whether the TCMB will be willing to move again should this move not bring about the desired stabilisation of the lira.”
“So far, the reaction has been to send TRY some 4% higher against USD; other emerging currencies have been propped up as well. CHF and JPY are weaker and equities have posted decent gains in Asian trading led by Japanese stocks.”
Key Quotes
“The TCMB is responding to the recent sharp sell-off in the Turkish lira, which has pushed inflation expectations well above the TCMB’s official 5% inflation target.”
“This very aggressive move – we had expected a raise of some 200-300bp – is clearly positive for TRY but is, at the same time, likely to have quite negative ramifications for the Turkish economy and growth is likely to take a further downturn.”
“Thus, it is questionable whether the TCMB will be willing to move again should this move not bring about the desired stabilisation of the lira.”
“So far, the reaction has been to send TRY some 4% higher against USD; other emerging currencies have been propped up as well. CHF and JPY are weaker and equities have posted decent gains in Asian trading led by Japanese stocks.”