USD/TRY: CBRT rate cut will not impact the lira – TDS

The Central Bank of the Republic of Turkey (CBRT) will announce on Wednesday, 19 February its policy rate. A rate cut is expected for economists at TD Securities who do not see the Turkish suffering. 

Key quotes

“We forecast the CBRT to cut interest rates by 50bps on Wednesday, 19 February. This is in line with the consensus and our previously held view.”

“We think that the market is not positioned for easing. Therefore, rate cuts should have some negative sway on the lira, but we think the currency will remain essentially unchanged with strong activity from state-owned lenders to keep USD/TRY in check. As usual, the announcement will be more a matter of defining the quantum of the cut rather than the direction.”

“We expect no major USD/TRY move due to CBRT action, provided the MPC cuts rates no more than 50-75bps. A decision to hold would see the lira rally somewhat, while deeper cuts than 100bps could add more significant negative pressure than the underlying adverse dynamic is already producing.”