Turkish Lira: CBRT maintains cautious easing stance - Commerzbank

Tatha Ghose at Commerzbank reports that Turkey’s Central Bank of the Republic of Türkiye (CBRT) cut its one-week repo rate by 100bp to 36.0%, alongside similar moves in overnight rates. Despite acknowledging upside inflation risks from higher Oil, the bank now claims indicators “confirm” disinflation and signals meeting-by-meeting flexibility without altering its easing trajectory. Commerzbank expects USD/TRY to reach 52.0 by year-end.

Turkish central bank continues to ease

"Turkey’s central bank (CBRT) cut its one-week repo rate by 100bp as expected yesterday, from 37.0% to 36.0%. CBRT also lowered both overnight rates by 100bp, taking the lending and borrowing rates to 39.0% and 34.5%, respectively."

"The changes from September’s statement were subtle but revealing. CBRT hardened its assessment that inflation indicators “suggest” deceleration, to the stronger claim that they “confirm” deceleration in the underlying trend."

"This confidence rests heavily on September’s softer inflation reading, which we think could prove to be a one-off caused by the temporary decline in imported energy prices in prior months. Oil has since climbed back above USD 110 per barrel. CBRT still acknowledges that elevated energy prices pose an upside inflation risk, but evidently does not consider this sufficient to delay easing."

"CBRT similarly tweaked its assessment of the real economy – that it “indicates” weakness. The most meaningful addition is that the size and timing of policy steps will be decided prudently on a meeting-by-meeting basis."

"This may signal flexibility over individual decisions, but does not challenge the direction of travel. CBRT is now committed to a rate-cutting path, even if it may sometimes skip a meeting. We expect USD-TRY to trade at 52.0 by year-end."