Turkish Lira: CBRT stays cautious on easing - Commerzbank

36.0% is the new one-week repo rate at the Central Bank of the Republic of Türkiye (CBRT). Commerzbank’s Tatha Ghose reports a 100bp reduction by Turkey’s central bank, accompanied by similar cuts to overnight rates. While acknowledging upside inflation risks from higher oil prices, CBRT now says indicators “confirm” disinflation. It also signals flexibility at each meeting, without changing its easing course. Commerzbank forecasts USD/TRY at 52.0 by year-end.

100bp cut: Turkish central bank extends easing

"Turkey’s central bank (CBRT) cut its one-week repo rate by 100bp as expected yesterday, from 37.0% to 36.0%. CBRT also lowered both overnight rates by 100bp, taking the lending and borrowing rates to 39.0% and 34.5%, respectively."

"The changes from September’s statement were subtle but revealing. CBRT hardened its assessment that inflation indicators “suggest” deceleration, to the stronger claim that they “confirm” deceleration in the underlying trend."

"This confidence rests heavily on September’s softer inflation reading, which we think could prove to be a one-off caused by the temporary decline in imported energy prices in prior months. Oil has since climbed back above USD 110 per barrel. CBRT still acknowledges that elevated energy prices pose an upside inflation risk, but evidently does not consider this sufficient to delay easing."

"CBRT similarly tweaked its assessment of the real economy – that it “indicates” weakness. The most meaningful addition is that the size and timing of policy steps will be decided prudently on a meeting-by-meeting basis."

"This may signal flexibility over individual decisions, but does not challenge the direction of travel. CBRT is now committed to a rate-cutting path, even if it may sometimes skip a meeting. We expect USD-TRY to trade at 52.0 by year-end."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Learn more.)