The latest decision by the Central Bank Republic of Turkey
Market was expecting a 100bps hike to 13.25%.
- Benchmark rate left unchanged at 8%
- Further monetary tightening will be delivered if needed
- Elevated levels of inflation and recent developments in cost factors have increased risks on expectations and pricing behaviour
TRY being sold off heavily on the decision. Here's the chart for USD/TRY:
I don't quite get what they were trying to do. If they were going to raise rates, they should've done so to meet the expectations of the market. A 50bps rise in rates is almost equivalent to no increase since the market would've reacted in the same way. But hey, I'm no central bank head.
It seems like the 50bps hike is a middle ground to try and meet market expectations and satisfy Erdogan.
Turkey has been suffering from overly high inflation as inflation hit levels of 13%, which is way more than the target of 5%.