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“Turkey’s central bank Governor Agbal delivered a very powerful message when presenting the latest quarterly Inflation Report,” note Rabobank analysts. “That should leave no one with any doubt that he and the MPC are fully determined to bring inflation in line with the 5% target.”

Key quotes

“In order to achieve this objective, the CBRT intends to maintain a tight monetary policy for “a long time,” which in practice means that the policy rate is set to remain at 17% throughout this year.”

“For the central bank to start lowering interest rates, strong evidence of a permanent fall in inflation and price stability will have to materialise which may not be the case until well into 2022.”

“Essentially, the MPC intends to be patient and avoid the same policy mistake as in 2019 when the easing cycle commenced too early and was too fast resulting in real interest rates plunging into negative territory – when inflation started rising – leaving the lira exposed and vulnerable.”