ANALYST VIEW-Turkey markets sink, lira shivers after surprise central bank decision

Credit: REUTERS/UMIT BEKTAS

A surprise move by Turkey's central bank to keep interest rates on hold against expectations for a hike has sent the lira to a new record low and knocked other Turkish assets. [nL8N2HD4OI]

LONDON, Oct 22 (Reuters) - A surprise move by Turkey's central bank to keep interest rates on hold against expectations for a hike has sent the lira to a new record low and knocked other Turkish assets.

Below are analysts' reaction to the decision.

PER HAMMARLUND, SEB

"The bank is pinning its hopes to the strength of the recent recovery in global risk appetite. However, market participants will be disappointed that they are abandoning the stable symmetry in the margins between the LLW (late liquidity window) and the one-week repo.

"The (Turkish central bank) is now back to a more unpredictable and opaque monetary policy framework. It appears to be a severe miscalculation. What on earth were they thinking, believing that they could get away with such obfuscation?"

PIOTR MATYS, RABOBANK

"This is disappointing. The central bank opted to keep the policy rate unchanged, although there is an element of tightening as the spread between the LLW and lending rate has widened.

"It is important to emphasize that the central bank does not have sufficient credibility to experiment with parameters of monetary policy.

"Every single step, every decision that the central bank makes is absolutely crucial for the lira -- there is no room to make any mistakes. Today's decision is a very good example why you should not experiment with the policy rate -- it is confusing, unnecessary and counterproductive."

NICK EISINGER, VANGUARD

"It's not good, basically. The market had priced (in) a large hike.

"They moved the corridor but not the main rate, so policy will tighten but they might really have just done a repo hike. It is more of the same, basically, and is hard for Turkey to rally on a more consistent basis."

RICHARD BRIGGS, GAM

"The messaging is really bad, that is the main issue here. It is a frustration because they had been starting to look a bit more credible recently by tightening, but now they are going back to this unconventional policy.

"The lira and CDS (credit default swaps) are not doing well on the back of it. The lira has been weak for a while and the reserves had stabilised a bit but the problems are still there."

(Reporting by Ezg Erkoyun in Istanbul, Marc Jones and Tom Arnold in London, Compiled by Karin Strohecker, Editing by Catherine Evans)

((karin.strohecker@thomsonreuters.com; +442075427262; Reuters Messaging: karin.strohecker.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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