SHOCKER: Turkey Central Bank raises O/N repo rate

Following the detention of over 100 people including the Mayor of Istanbul Metropolitan Municipality (IMM) Ekrem İmamoğlu, as well as politicians, businessmen and journalists, market sentiment was shaken yesterday and today, with strong ripples in the government bond and  currency market. The Central Bank of the Republic of Turkey (TCMB) took action for the second time today to prevent the rapid depreciation of the Turkish Lira due to what bankers report to be heavy demand from foreign investors, as well as retailers. The TCMB Monetary Policy Committee deemed it appropriate to take measures supporting the tight monetary stance, taking into account the risks that may arise in terms of inflation outlook.   [embed]https://www.youtube.com/watch?v=8qnXs2jOFCo&t=50s[/embed] First, forward foreign exchange sales transactions with TL settlement were initiated. The statement said, "In order to ensure the healthy operation of the foreign exchange market, to prevent possible volatility in foreign exchange rates and to balance foreign exchange liquidity, negotiated forward foreign exchange sales transactions will be initiated with the Central Bank of the Republic of Turkey." Despite the move, an increase was observed in London SWAP rates.  

INTEREST RATE INCREASED

In this context, the Central Bank increased the overnight lending rate to 46 percent. On the other hand, the policy rate, the one-week repo auction interest rate, was kept constant at 42.5 percent, while the overnight borrowing rate remained at 41 percent. In addition, it was reported that new measures were taken for TL and foreign exchange liquidity in order to limit volatility in the markets. The Central Bank also announced that it stands ready to take additional measures if necessary to ensure the effective functioning of financial markets. The Board stated that monetary policy would be tightened if inflation deteriorated significantly and permanently. It was emphasized that the decisions taken would be made within a transparent and data-driven framework. The Monetary Policy Board Meeting Summary will be published within five business days.   [embed]https://www.youtube.com/watch?v=uJYhess_NQo[/embed] IMPORTANT DİSCLOSURE:  PA Turkey intends to inform Turkey watchers with diverse views and opinions.  Articles in our website may not necessarily represent the view of our editorial board or count as endorsement.     Follow our  English language YouTube videos  @ REAL TURKEY:   https://www.youtube.com/channel/UCKpFJB4GFiNkhmpVZQ_d9Rg And content at Twitter: @AtillaEng Facebook:  Real Turkey Channel:   https://www.facebook.com/realturkeychannel/