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Turkey Hikes by 6.5%, Lower Than Expected as Dollar Bonds Trade Weaker
June 23, 2023
Turkey’s central bank, the CBRT hiked its policy rate by 6.5%, lower than the median 12% forecasted under new governor Hafize Gaye Erkan. This is Turkey’s first rate hike in two years and marks a move away from its unorthodox policy of cutting rates despite high inflation. The one-week policy repo rate now stands at 15% from 8.5%. Some market participants seem to view the hike as rather modest given that the Lira fell by over 5%. Other analysts look at the move as being a step in the right direction. The CBRT said, “Monetary tightening will be further strengthened as much as needed in a timely and gradual manner until a significant improvement in the inflation outlook is achieved”. Inflation is at 39.6% and analysts expect more hikes from the central bank in the coming months.
Turkey’s dollar bonds were trading broadly weaker across the curve. Its 8% 2034s were down 1.1 points to 94.69, yielding 8.78%
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