What Does Tim Ash Think About the CBRT Rate Decision?
tim-ash
BlueBay Asset Management’s Senior Emerging Markets Strategist Tim Ash believes the Central Bank of Turkey (CBRT) should hold rates steady at today’s Monetary Policy Committee (MPC) meeting, despite market expectations for a 100-basis-point cut. He outlines three possible scenarios for the decision — arguing that holding rates would strengthen credibility, a small cut would send the wrong message, and a larger cut would be a “disaster” that sets the CBRT back years.
Cautious Mood Ahead of CBRT Rate Decision: Fiscal Risks Threaten Inflation Goals
“Holding Rates Would Be the Right Move”
According to Ash, the latest two inflation readings — both higher than expected — and the likelihood of another ugly print in October make a rate hold the most sensible decision.
“By holding, the CBRT would send a strong signal to the market, boost its credibility, and help anchor expectations. It would demonstrate real independence and put some credibility back in the bank,” he said, adding that such a move would also provide a buffer against political pressures.
“A 50–100bps Cut Would Undermine Credibility”
Ash says a moderate rate cut — between 50 and 100 basis points — “could be worse” but would still undermine the CBRT’s credibility since inflation remains high.
“Cutting while inflation is rising will only reinforce inflationary expectations. The economy is still growing at around 3–4%, so there’s been little growth sacrifice,” he said.
He also warned that monetary policy must respond to fiscal laxity:
“If fiscal policy isn’t tight enough, the MPC has to compensate by keeping monetary policy tighter. That’s how you send the message to politicians that fiscal policy must carry more of the load.”
“A Cut Over 100bps Would Be a Disaster”
Ash describes any rate cut greater than 100 basis points as “a ridiculous decision” that would set the CBRT back years.
“It would send the message that policy is still being made in the palace. Such a move would destroy the Bank’s credibility once again,” he said.
According to Ash, a large cut would pressure the lira, increase inflation expectations, and risk renewed volatility in Turkish assets.
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