7 Jun 2013
Flash: Turkish Central Bank ready to take action - BBH
FXstreet.com (Barcelona) - Brown Brothers Harriman analysts note that the Turkish central bank governor Basci seems ready to take action to stabilize markets.
They note that expectations have now rightfully shifted from easing to tightening of monetary conditions and they could see the bank return to the policy framework of using “special” days and “normal” days for liquidity management and guiding the interbank rate higher. They write, “The interbank rate has risen from around 4.0% in mid-May to 5.6% now. At this point, the upper end of the corridor set at 6.50% represents the upper limit for the interbank rate. Raising the top end of the corridor would be a drastic measure, and we don’t think it will happen unless the situation gets a lot worse. We do note that rising political concerns go hand in hand with steadily deteriorating economic fundamentals in Turkey.”
They note that expectations have now rightfully shifted from easing to tightening of monetary conditions and they could see the bank return to the policy framework of using “special” days and “normal” days for liquidity management and guiding the interbank rate higher. They write, “The interbank rate has risen from around 4.0% in mid-May to 5.6% now. At this point, the upper end of the corridor set at 6.50% represents the upper limit for the interbank rate. Raising the top end of the corridor would be a drastic measure, and we don’t think it will happen unless the situation gets a lot worse. We do note that rising political concerns go hand in hand with steadily deteriorating economic fundamentals in Turkey.”