Turkish Central Bank Raises Rates Sharply
OREANDA-NEWS The Turkish Central Bank raised its rate of 625 b.p. from 17.75% to 24%. Its decision had a positive impact on the currencies of emerging economies.
On Thursday, September 13, a meeting of the Central Bank of Turkey. The goal is to optimize the value of The Central Bank rate . At 12:00 GMT, the Dollar / Lira jumped up 4.5% to 6.54 after the words of President Recep Erdogan on the need to reduce the key rate. The Turkish Lira experienced strong pressure due to the indecision of the monetary authorities of the country, which are under the influence of the President of Turkey, who is against the rate hike.
Many investors expected a rise of more than 300 b.p. the key REPO rate is at least up to 21%. On 3 September, the government stated that"the necessary steps will be taken to ensure price stability". Expected rate increase was 325 b.p. However, the Central Bank of Turkey lifted the rate from c 17.75% to 24%. It surprised everyone.
According to analysts, the initial market reaction to the decision was positive, the Dollar/Turkish Lira fell 6.45 to 6.20, for some time touching 6.03, that is, the Lira strengthened by about 4%. Nevertheless, the Dollar / Turkish Lira continues to grow by more than 9% since the collapse of the Lira on August 10 and by almost 40% since the beginning of the year. Although this is a step in the right direction, the Lyra crisis is not over yet. It will take time to restore trust.
Several Central Bank meetings are scheduled this week. Yesterday, meetings were held the Bank of England and the ECB. As expected by market participants, the Bank of England and the ECB have left the parameters of their monetary policy unchanged.
The ECB kept the base rate at zero and announced that it will keep rates unchanged until at least the summer of 2019. The Bank will continue to buy assets worth €30 billion a month until the end of September. After September 2018, the ECB will reduce the volume of bond purchases from €30 billion to €15 billion, and by the end of the year plans to completely curtail this program.
The Bank of England expected to keep the base rate at 0.75%. He also confirmed a £435 billion asset buyback from the market at the previous meeting, which took place on August 2, 2018, the base rate was raised to 0.75%. The rate hike was the first time since November 2017