With the lira under pressure expectations are mixed on whether the Turkish central bank will opt for a sixth consecutive interest rate cut on Wednesday. We expect no change from the current 11.25%.
Inflation Continues to Edge Back Up
Turkey’s Central Bank (CBRT) is once again at a crossroads. After 1275bps in rate cuts since July last year the lira is under pressure and the focus on the true level of reserves has intensified. State banks have conducted regular foreign exchange sales in recent weeks, yet the lira has weakened 2% in the last month. Total open FX positions of the state banks reached US$4.8bn for the week ending February 7, its highest for a long time, with US$2.8bn additional positions opened, according to BRSA data.
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