Turkey | CBRT reacted proactively by 200bps hike

Summary

The Central Bank of Turkey (CBRT) raised the policy rate by 200bps to 19% beating the expectations of a 100bps hike. We maintain our view to have the first rate cut in 4Q21, which will depend on the inflation dynamics and might require the CBRT to stay tight for longer.

Key points

• Key points:
• The CBRT reaffirmed the upside risks on inflation outlook associated with the recent volatility in global financial markets and the still continuing both demand-pull and cost-push factors.
• The two forward guidance remarks have also been kept the same: (i) the commitment for additional monetary tightening if needed, (ii) the decisive maintenance of the tight stance “for an extended period of time”.
• The Bank decided to implement a front-loaded and strong additional monetary tightening, confirming its forward-guidance in the previous communications

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