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28 Jan 2014
Flash: Turkish Central bank to hold crisis meet amidst EM turbulence - BTMU
FXstreet.com (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ notes that the Central Bank of Turkey will hold an emergency MPC meeting today amidst emerging market uncertainty.
Key Quotes
"Emerging market currencies have also been supported by the announcement yesterday from the Central Bank of Turkey that they will hold an emergency MPC meeting today. It has prompted speculation that the CBoT will raise interest rates more significantly and/or introduce capital controls to help support the lira."
"It follows the disappointing market reaction to their ast ordinary MPC meeting held on the 21st January and to direct foreign exchange intervention with Turkey’s reserve holdings not large enough for such action to be credible. With lira weakness likely to push inflation in Turkey back closer to an annual headline rate of 10% and Turkey running a current account deficit at around 7.0% of GDP, it is clear that higher policy rates are required to help stabilize the lira."
"Unorthodox monetary policy also adds to policy uncertainty. The overnight lending rate is currently held at 7.75% although it can be pushed up to 9.0% on additional monetary tightening days. To satisfy the market it is likely that the CBoT will at the minimum deliver a 200-250 basis point hike in the overnight lending rate."
Key Quotes
"Emerging market currencies have also been supported by the announcement yesterday from the Central Bank of Turkey that they will hold an emergency MPC meeting today. It has prompted speculation that the CBoT will raise interest rates more significantly and/or introduce capital controls to help support the lira."
"It follows the disappointing market reaction to their ast ordinary MPC meeting held on the 21st January and to direct foreign exchange intervention with Turkey’s reserve holdings not large enough for such action to be credible. With lira weakness likely to push inflation in Turkey back closer to an annual headline rate of 10% and Turkey running a current account deficit at around 7.0% of GDP, it is clear that higher policy rates are required to help stabilize the lira."
"Unorthodox monetary policy also adds to policy uncertainty. The overnight lending rate is currently held at 7.75% although it can be pushed up to 9.0% on additional monetary tightening days. To satisfy the market it is likely that the CBoT will at the minimum deliver a 200-250 basis point hike in the overnight lending rate."