Turkey’s central bank cut its one-week repo rate again on Thursday, this time by 100bp to 15% in line with the median estimate in a Bloomberg poll of 24 economists. This further underscores President Erdogan’s clout in pushing for cheaper borrowing costs despite rising inflation – consumer inflation rose to 19.9% YoY in October. The latest rate cut follows a 300bp cut over two consecutive and unexpected moves earlier, in contrast to other central banks that are mulling rate hikes to curb a rising inflation. This has had a bearing on the Turkish lira, which has now weakened by over 30% against the US dollar this year with 15% of the depreciation seen this quarter itself. Piotr Matys, a senior currency analyst at InTouch Capital in London said, “Today’s decision provides more evidence that the central bank simply doesn’t care about the value of the lira and rejects the notion that substantial depreciation will have serious negative consequences.”
Turkey’s 6.875% 2036s and 6.5% 2033s traded 1.86% and 1.81% weaker to 96.05 and 94.44 yielding 7.32% and 7.2% respectively.
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