Expected Action, Weak Narrative

TURKEY - Report 17 Jul 2014 by Murat Ucer
As expected, the Monetary Policy Committee cut its key reference rate (one-week repo) today by 50 bps to 8.25%, but left its O/N lending rate intact at 12%.As well, in what we interpret as being largely a technical move – because the reference rate would be otherwise almost equal to the O/N borrowing rate – the latter was reduced by 50 bps, to 7.5% (Graph 1). In terms of the substance of the move, we think there is nothing new in that, the Bank continues its tightrope walk stuck between political pressures and economic realities, i.e. it continues to ease in order to please its critics, but...

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