It's all politics, at this stage...

TURKEY - In Brief 24 Feb 2015 by Murat Ucer

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Since my name was mentioned in Cosmic's latest post, I might as well do a follow up, though I have little to add to his succinct analysis, especially the two main observations He makes -- that: 1) rate cuts should not have much effect on domestic demand against a backdrop of heightened policy volatility; and 2) this was not the wisest thing to do, because further currency weakness down the road could derail the cyclical disinflation story that the CBRT so desperately needs. The only thing I would add is that we have seen yet again that when stuck between politics and 'other factors', as long as the latter risks are not acute, the CBRT always chooses to please politics. So this expectation (or hope, rather) of ours that we had expressed in our last Tracker -- that despite all the caveats "we are more inclined to think that the CBRT will do the “right” thing and leave the upper end of the corridor untouched" was again proven wrong. I guess just like the CBRT never learns that these sorts of cuts eventually backfire, the economic analyst in me never learns (or willing to accept) that it is really all about politics at this stage.