Surprise Rate Cut Augurs Poorly For Lira

The Central Bank of the Republic of Turkey (CBRT) surprised the markets with a 50bps cut to the benchmark overnight borrowing rate (to 16.25%) on November 19. As recently as July, the CBRT had tightened monetary conditions so this decision marks a clear reversal of policy orientation. The focus is now toward the medium-term macroeconomic outlook, which in concurrence with BMI 's core view, the central bank now sees as characterised by rapid aggregate demand destruction, short-term credit market volatility and marked disinflation.

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