MPC: 'Stop, or I'll Say Stop Again'

TURKEY - In Brief 07 Mar 2018 by Murat Ucer

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In line with the consensus, the CBRT’s Monetary Policy Committee (MPC) did not change any of the short-term interest rates at today’s meeting, keeping the Late Liquidity Window lending rate at 12.75%, one-week repo rate at 8.0%, and the O/N lending and borrowing rates at 9.25% and 7.25%, respectively (see chart). In terms of the content of the statement, there was virtually no change in wording from the previous statement, except for the addition of a new sentence expressing concern on inflation inertia and core inflation dynamics, quote: “Underlying trend indicators display inertia and the core inflation remains elevated”. This is a bit like the addition to the previous statement, of the expression that markets should not expect any easing because of temporary or base effect-related drops in inflation. It’s a hawkish twist by the norms of our central bank, which finally acknowledges the problem, but will most likely do nothing about it. (This, incidentally, is what made us think of the late Robin Williams joke in the title about the British (versus the American) police (see the end of the short video here)). The bottom line is that there was nothing new at today’s MPC meeting, with the CBRT continuing to adopt a somewhat more realistic language or communication strategy under the circumstances, but ultimately is set to muddle-through with the current monetary policy stance as long as feasible.