TURKEY: CBRT Set to Confirm Financial Stability is Near-Term Policy Preference
Apr-15 15:05
- Following the bank’s unscheduled overnight lending rate hike in late March (just weeks after the 250bps cut to the benchmark one-week repo rate), the CBRT’s easing cycle has hit a significant roadblock, and cuts to the one-week repo rate are unlikely in the very near-term. This confirms financial stability as the policy preference over slowing headline CPI.
- The vast majority of analysts surveyed see no change in policy at this month’s meeting, although a not insignificant minority see a real risk of policy tightening this week. HSBC note that this meeting could prove difficult and while the bank have succeeded in returning stability to TRY markets, it has come at a heavy cost of bank reserves.
- Reports of intervention via public banks were widespread following Imamoglu’s detention, which were gauged at $5-10bln and supposedly targeted the 40.00 level in USD/TRY. The bank also began selling TRY-settled FX forwards to further cushion volatility and liquidity issues – all of which would be unsettled by further easing at this stage. Underscoring the importance of reserves, Fitch Ratings specified that the trajectory of reserves will be key in assessing sovereign credit implications going forward.
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FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
Mar-14 21:28
The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below.
- The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
- More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.
FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten
Mar-14 21:25
Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).
- Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
- A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
- Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.
CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
Mar-14 21:17
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
