MPC: Tighter, Yet Still Behind

TURKEY - Report 26 Apr 2017 by Murat Ucer

The Monetary Policy Committee (MPC) raised the Late Liquidity Window (LLW) rate by a further 50 bps today to 12.25%, atop last meeting’s (March 16, 2017) 75 bps hike, while keeping all other short-term rates unchanged (see chart). The consensus was “tilted toward” no change of the LLW rate (as well as all other rates), which explains the lira’s favorable reaction to the decision that strengthened to around 3.57 to the dollar at this writing, from just under 3.60 before the decision. Yet, it is worth adding that contrary to most media/analyst reporting, the move was not entirely unexpected. In at least one survey we saw (Reuters), for instance, quite a few participants expected a hike of the LLW rate (in the 25-75 bps range). (We had also given a 50% chance to the LLW rate hike scenario in our Weekly Update).

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