24 Feb 2015
Prospects for Turkey remains negative – BBH
FXStreet (Edinburgh) - Ilan Solot, Strategist at BBH, remarked the negative stance on Turkey and assessed the recent rate cut by the CBRT.
Key Quotes
“The bank cut its benchmark rate by 25 bp to 7.5%, in line with the majority of forecasters, but it surprised markets with a 50 bp cut in the overnight lending rate to 10.75%, which is the top end of the corridor”.
“The statement noted that it would keep policy tighter until the inflation outlook improves”.
“The government had seemed to be easing off the pressure after Finance Minister Simsek said the bank “will do what is right.” However, just after today’s decision, Prime Minister Davutoglu has already come out saying that the cuts are insufficient”.
“Caught up in the excitement of lower commodity prices, Turkey looks like a prime candidate for a major policy mistake, especially in light of the rapid depreciation of the lira and the country’s low stock of FX reserves. We remain bearish on Turkey, especially against other high-beta countries with better fundamentals, such as Mexico”.
Key Quotes
“The bank cut its benchmark rate by 25 bp to 7.5%, in line with the majority of forecasters, but it surprised markets with a 50 bp cut in the overnight lending rate to 10.75%, which is the top end of the corridor”.
“The statement noted that it would keep policy tighter until the inflation outlook improves”.
“The government had seemed to be easing off the pressure after Finance Minister Simsek said the bank “will do what is right.” However, just after today’s decision, Prime Minister Davutoglu has already come out saying that the cuts are insufficient”.
“Caught up in the excitement of lower commodity prices, Turkey looks like a prime candidate for a major policy mistake, especially in light of the rapid depreciation of the lira and the country’s low stock of FX reserves. We remain bearish on Turkey, especially against other high-beta countries with better fundamentals, such as Mexico”.