Central Bank of Turkey cuts key interest rate to 19.75 pct

The Central Bank of Turkey cut its one-week repo rate to 19.75 percent from 24 percent, as was widely anticipated. Today’s rate cut of 425 basis points was dovish on the surface, as was also indicated by the Turkish lira trading slightly lower initially after the announcement.

Nevertheless, the lira softness was short-lived with EUR/TRY now close to levels before the announcement. This somewhat odd pricing behaviour was partially because of unconventional measures not being introduced, and partially because of a “relieve” reaction, stated Nordea Bank in a research report.

“Overall, we therefore remain sceptical about the outlook for the lira. We think more and too much easing is coming for the rest of the year, and on top of that, we have a defensive view on Emerging Markets and risky assets in general”, added Nordea Bank.