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The Central Bank of the Republic of Turkey (CBRT) surprised economists at TD Securities by cutting ‘only’ 50bps. With the initial reaction, the USD/TRY pair pulled away from session highs and was last seen trading at 6,8028.

Key quotes

“The CBRT announced that it lowered its policy (one-week repo) by 50 basis points. The move was framed as ‘a measured cut in the policy rate’ to 8.25% today, instead of the 100bps we had penciled in.”

“The fact that USD/TRY recently scored a new-all time high of 7.2690 on 7 May may have to do with a more cautious approach today than in the recent past.”

“The medium and long-term economic and financial prospects for Turkey remain relatively bleak, in our opinion, especially as policies are still too skewed towards growth. But for the short-term, USD/TRY may receive a further push down as today’s announcement shows restraint that suggests the easing cycle may be close to an end.”