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Analysts at Rabobank point out that today we have a key interest-rate decision in Turkey, and their EM Strategist Piotr Matys expects the CBRT to raise its main policy rate by 100bp to 18.75% at 12:00BST (13:00CET).

Key Quotes

“After CPI inflation accelerated sharply to 15.4% y-o-y in June, and will continue to rise further given TRY fell to yet another record low against the basket of USD and EUR earlier in July, fuelling inflation expectations.”

“Given that today’s meeting is the first one since the general and presidential elections held in June, a rate hike should ease market concerns about the independence of the central bank. It would also provide TRY with much-needed support.”

“While yet another decisive monetary policy decision would weigh on USD/TRY, scope for a retracement will be constrained by unfavourable external factors, including trade conflict between the US and China and the rising risk of FX wars.”

“Should the CBRT opt to keep rates on hold, the knee-jerk market reaction is likely to be negative with USD/TRY rising sharply towards the all-time high at 4.9743 set on 12 July.”