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July 25, 2019

Turkey | The easing cycle starts with a bold action

The Central Bank of Turkey (CBRT) reduced the policy rate by 425 bps from 24% to 19.75%. The movement was bolder than expected by market expectation and ours (Consensus 250 bps, BBVA 200 bps). Some risks remains on both economic and geopolitical sides which should be met with a gradual and cautious policy.

June 12, 2019

Turkey | CBRT remains “tight” but closer to “ease”

As expected, the CBRT maintained its policy rate unchanged. Important uncertainties on politics and geopolitics remain to be solved, so today’s decision is a prudent one. We maintain our view that the CBRT will start the gradual easing cycle towards the end of the year, but the expected disinflation could bring it forward.

March 7, 2019

Central Bank digital currencies: features, options, pros and cons

The emergence of cryptocurrencies is opening the way to Central Bank Digital Currencies (CBDCs). This paper highlights the pros and cons of issuing CBDCs under four different variants: from the more modest proposals to the most ambitious ones where there could be a serious disruption in financial intermediation.

February 18, 2019

The Central Bank of Turkey relies on Macro-Prudential and Communication policies

The CBRT decided to reduce the RRR in Turkish Lira and increase the upper limit of ROM facility for holding standard gold converted from wrought or scrap gold. Rather than considering the decision as an early sign of an interest rate cut, we perceive the decision as the logical response to stimulate credit but avoid a prema…

January 16, 2019

Turkey | The CBRT stays tight with deeds and words

The Central Bank (CBRT) kept its policy rate (one-week repo, 24%) unchanged in line with expectations. We consider the decision as the right one as it supports the disinflation path and reinforces credibility. In our view, the CBRT should wait for June (when the recovery in inflation becomes more obvious) to start an easing…

September 14, 2018

Turkey | The CBRT delivers a new bold action

The Central Bank (CBRT) hiked policy interest rate (one-week repo) by 625bps to 24.0%. The hike is remarkably higher than expectations (21% Bloomberg) and even ours (22.75% BBVA Research). The decision of the CBRT doesn't only contribute to fight against inflation and inflation expectations but also supports financial stabi…

May 18, 2018

China | Financial liberalization: time to restart

The process of China’s financial liberalization ground to a halt in 2015-2017 after experiencing a cluster of episodes of financial turmoil. After a few years of adjustment, the authorities now seem to be ready to press ahead with their agenda of financial liberalization again. Moreover, the authorities’ renewed interest in…

April 26, 2018

Turkey | The CBRT raises rates by 75 bps

The Central Bank (CBRT) hiked its de-facto policy rate (late liquidity window, LLW) by 75 bps to 13.50%, in line with our expectation but slightly higher than the median market call, 50 bps. At two digits inflation, anti-inflationary policies should be at the forefront of economic strategies in a comprehensive way, includin…