The Turkish central bank undertook a non-typical monetary policy path, most likely aiming to strengthen the lira without changing their official rates. They achieved this by restricting access to the one-week repo window, and thus shifting banks' financing demands to the higher overnight lending rates. In this way, without raising its official interest rates, the CBRT has forced Turkish banks to borrow at higher rates and therefore raised the effective interest rate in the economy. According to Bloomberg the effective interest rate in Turkey has increased 39 bp. According to Bloomberg Economics the CBRT can use this stealth method to increase rates by a further 261 bp (for a total of 300 bp).
From a political standpoint it is interesting if Erdogan knows of the CBRT's actions and if he has given his approval for raising rates without the knowledge of the Turkish people.
At 12:00 Sofia time the exchange rate of USD/TRY was between 5,95 and 6.
Source: Bloomberg Finance L.P.
Image: Used with permission of Bloomberg Finance L.P.
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