Thursday, 30 January 2014

money policy decisions at midnight

The situation in Turkey from December, 17 was continuing, with especially EUR/TRY and USD/TRY rates, (recorded highest rates as... 3.203 and 2.3335)
Then, Central Bank of Turkey decided to intervene as for controlling this high leakage of Turkish Lira.
Today I mean at midnight, they have announced that the interest rates and one week repo rate  in the interbank market and BIST Repo Repurchase-Reverse Repurchase Agreement markets, have been increased as: 

  • Overnight Interest Rates: Marginal Funding Rate from 7.75% to 12%, borrowing rate from 3.5% to 8%, and the interest rate on borrowing facilities provided for primary dealers via repo transactions from 6.75% to 11.5%.
  • One-week repo rate, from 4.5% to 10%.
  • Late Liquidity Window Interest Rates (between 4:00 p.m. – 5:00 p.m.): Borrowing rate is kept at 0%, lending rate, from 10.25% to 15%.

With these these announcements, EUR/TRY and USD/TRY rates followed a downtrend during the day. But, in the medium run, surely, a high inflation rate problem can be arisen.
On the other hand, tonight The US Federal Reserve reduced its monthly asset purchases by $10bn - as expected. But this reduction in the monetary expansion of USA, even it has been expected, in Turkey, can cause the expectations about increasing of USD/TRY rate. In the medium run, I think that Central Bank's interest rates decisions will be less effective on USD/TRY rate than EUR/TRY rate.

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