ISTANBUL, July 16 (Reuters) – Turkey’s central bank could “one-off” interest rate cuts of around 100 basis points in December to take advantage of lower inflation expected in November, as long as global financial markets will lead the way, Societe Generale bank said in a note.
A fall in consumer prices “could prompt the central bank to consider a one-off rate cut at the December MPC meeting … subject to a still accommodating external environment at that time,” the analyst wrote. Phoenix Kalen in a customer note. .
“However, the rate cuts run counter to a broader normalization of rates globally and may need to be reversed afterwards if they invite further marked weakness in TRY.”
The recently stable monetary policy “in the face of political pressure” has boosted investor confidence in the Turkish lira, she added. “Some recovery in foreign tourism over the summer months could help boost domestic currency liquidity, shielding (the lira) from pronounced weakness.”
Reporting by Jonathan Spicer; Editing by Dominic Evans
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