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INSTANT VIEW-Turkey holds rates but hints at where it is heading

LONDON, April 15 (Reuters) - Turkey’s central bank held rates steady at 19% as expected on Thursday in its first decision since President Tayyip Erdogan fired the hawkish former governor. But it dropped a pledge to raise them again if needed.

JOHN HARDY SAXO BANK HEAD OF FX STRATEGY

“They removed the reference to continued tightening of policy, obviously that was a relic of the previous leadership.”

“Turkey is in a real bad spot in terms of attracting inflows and it is dealing with a massive COVID outbreak... We are seeing the lira weakening on the back of this and there is a likelihood that it continues.”

“Any daylight they see they are going to want to cut rates. Holding them here (today) is just an acknowledgment they can’t get away with it for now.”

WILLIAM JACKSON, CHIEF EMERGING MARKETS ECONOMIST, CAPITAL ECONOMICS

“The decision by the Turkish central bank (CBRT) to leave its policy rate at 19.00% was accompanied by reassuring language that the MPC, with new governor Sahap Kavcioglu in charge, will take the inflation target seriously.”

“But the language also suggests that they are looking for opportunities to lower interest rates.”

NIKOLAY MARKOV, SENIOR ECONOMIST, PICTET ASSET MANAGEMENT

“It’s a weaker commitment than previously and that’s probably driving the lira.

“What is reassuring is that there’s a bit of continuity from the old governor with rates on hold and still a hawkish message.

“I’m not sure if it will be enough to stabilise the lira in the short-term, but will help keep Turkey afloat, especially if they keep the policy rate unchanged before June. If there is any change, it could be catastrophic.”

ARTHUR BUDAGHYAN, CHIEF EMERGING MARKET STRATEGIST, BCA

“I think the decision is not just an economic decision but also a political decision... The underlying pressure from President Erdogan is for lower rates.”

“Real rates in Turkey will be below what is warranted and inflation won’t come down.”

“The path of least resistance for the currency is down.”

TIM ASH, SENIOR EM SOVEREIGN ANALYST, BLUEBAY ASSET MANAGEMENT

“Dovish - clearing the deck to cut at the first opportunity.”

“Inflation is rising, the current account is widening, and reserves are falling.”

“How can the CBRT cut without sacrificing the lira?” (Reporting by Marc Jones and Tom Arnold)

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