"Turkish Surprise!!
Published: 3 August, 2011
written by: Bill Hubard , Chief Economist at Markets.com
The CBRT announces a surprise intermeeting session on Thursday in order to discuss “Eurozone debt problems and global growth outlook.” The Turkish announcement has raised the risk of some combination of an increase in the overnight borrowing rate, a decrease in reserve requirements, or a cut in the policy rate (1-week repo), likely in that order of probability. The focus for the CBRT looks to be more on trying to forestall further weakness in the currency, so raising the overnight borrowing rate would seem to help there both by narrowing the rate spread, as well as narrowing the corridor between it and the repo rate, which has been a particular source of angst and distrust of CBRT policy by the market. But while raising the overnight borrowing rate could kill 2 birds with 1 stone there, it would also represent a bit of an about face of policy, even if proves a somewhat temporary measure to strengthen the lira, as the CBRT explicitly began lowering the borrowing rate from 6.50% to 1.50% in the fourth quarter of 2010 in order to shift the focus of policy-making to the repo rate.
More: Markets.com"
