EM CEEMEA CREDIT: TURKEY: Raises O/N Lending Rate
Mar-20 15:00
Republic of Turkiye (TURKEY; B1pos/BB-u/BB-)
“*TURKEY RAISES O/N LENDING RATE TO 46% AT INTERIM MEETING” - BBG
- Supportive for currency and should help to reduce volatility, we view measures as positive for credit spreads.
- Surprise move from the TURKEY central Bank raising overnight lending rate to 46% from 44%. The policy rate was kept at 42.5%. The governor commented that “monetary policy stance will be tightened in case a significant and persistent deterioration inflation is foreseen” (source: Central Bank)
- In Feb the governor revised inflation guidance for 2025 from 24% to 21% and for 2026 inflation to be at 12% and 2027 at 8%. Moody’s expectation is for inflation to be around 30% by year end.
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- A: On structural liquidity, it is not just the size, but also the composition that matters. My personal preference is we should provide banks with sufficient liquidity in a structural way so that they have enough reserves to face unforeseen volatility, but also reserves they can count on to extend credit to the economy.
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