The Turkish central bank joined the swelling ranks of central banks rushing to ease policy rates this week.
The CBRT has now cut rates back down to single digits with its own 1% interest rate cut. Following the move which echoed that of the Fed earlier this week, Turkish interest rates now sit at 9.75%.
This comes ahead of the bank’s scheduled rates meeting on March 19th. And, once again, it highlights the fragile state of the global economy as more and more central banks scramble to buffer liquidity conditions.
CBRT Joins Co-ordinated Measures
The caution with which the central bank views the current situation was clear in its statement.
The CBRT noted:
“As developments regarding the spread of the coronavirus have weakened global growth outlook, central banks in advanced and emerging economies have taken coordinated expansionary measures. The pandemic disease is closely monitored for its evolving global impact on capital flows, financial conditions, international trade and commodity prices.”
The statement was not totally negative, however. The bank did note:
“In the period preceding the coronavirus outbreak, Turkey’s macroeconomic indicators improved significantly… A sustained fall in inflation and a sizable adjustment in the current account were achieved”.
Further Measures Announced
Along with the 1% rate cut, the CBRT also announced a range of further measures. These aim to help support the economy during the amplified risks posed by the coronavirus.
These additional measures include:
“Enhancing predictability by providing banks with flexibility in Turkish lira and foreign exchange liquidity management, (ii) offering targeted additional liquidity facilities to banks to secure uninterrupted credit flow to the corporate sector, (iii) boosting cash flow of exporting firms through arrangements on rediscount credits”.
CBRT To Monitor Incoming Data
In terms of forward guidance, the CBRT advised that:
“Monetary stance will be determined by considering the indicators of the underlying inflation trend to ensure the continuation of the disinflation process. The Central Bank will continue to use all available instruments in pursuit of the price stability and financial stability objectives. It should be emphasized that any new data or information may lead the Committee to revise its stance”.
The USDTRY has broken out above the top of the bullish channel which has framed price action since May 2019.
For now, the rally has run into resistance at the 1.4641 level. This has been a long-term supply level in USDTRY.
While above the channel top, however, a further move higher seems likely. In fact, the 6.6469 level is the next topside region to watch. To the downside, any retracement should find support into the 6.2255 level.