CBRT simplifies monetary policy

TURKEY - In Brief 28 May 2018 by Murat Ucer
The CBRT has made public today what was promised at a closed-door meeting with bankers last night, and simplified the monetary policy framework. In a short announcement, the CBRT said that one-week repo rate will be the policy rate, which will be equal to the current funding rate (of 16.50%), and the overnight borrowing and lending rates will be set at 150 basis points below/above the one-week repo rate (i.e. at 15% and 18%), respectively. The Bank had not announced where it would set the late liquidity window rate, as of this post.The move is significant and decisive, although it is long overdue and comes after much trepidation -- and hence, a clear positive for markets and the lira. It also attests to some degree of policy pragmatism that still exists in Ankara (an issue we've been nervously watching) and enhances visibility through the June 24 elections, which was a major source of concern for markets. Assuming markets will continue to react positively to the move and the lira will remain stable, we do not see the Bank moving any further at its regular June 7 meeting.

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