On Thursday, the Central Bank of the Republic of Turkey kept its key interest rate unchanged at 9.00% as expected. Analysts from TD Securities continue to believe that dramatic rate hikes will be needed in 2023.
“The CBRT left the benchmark one-week repo rate on hold at 9.00%, one month after calling the end of the easing cycle. This is in line with our expectations and the consensus. The basic structure of the CBRT statement has remained unchanged compared to the November one.”
“The comment that "the comprehensive review of the policy framework continues with the aim of encouraging permanent and strengthened liraization in all policy tools of the CBRT" may be loosely interpreted as the possibility of more easing down the road, if this is deemed to help the CBRT achieve its objectives. While this has always been a distinct possibility, the CBRT seems to show no concern of a market misinterpretation. And this lack of concern is concerning to us. The market may also find itself unprepared for this.”
“We continue to believe that dramatic rate hikes will be needed next year, but not before the lira becomes unhinged again. Current conditions seem to discourage going for a negative view on the lira in the short term, but the fundamental backdrop continues to suggest this is the path of least resistance.”
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