A Very Small Step in the Right Direction

TURKEY - In Brief 19 Nov 2013 by Murat Ucer
Today, the CBT/MPC kept all policy rates (weekly repo and O/N corridor) unchanged as expected, but said the following: "In order to contain the impact of these developments on the pricing behavior, the Committee decided to strengthen the cautious stance and reduce the volatility of short term money market rates. To this end, one month repo auctions will be terminated, as a result of which interbank money market rates will materialize around 7.75 percent."  The 5-day moving average of the interbank rate has been at 7.2% lately.  So if the CBT sticks to its word, we are talking about a 40-50 bps hike, de facto. Because the Bank is basically stabilizing the money market rates at close to 7.75%, the last paragraph of the previous statement on the liquidity developments has been naturally dropped.The economics of the statement was exactly the same. All in all, the move is in the right direction, but it is too small to make a significant difference in the broader story, in our view.

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