Shock And Awe From Turkey Which Hikes Overnight Rate By 4.25% To 12%, Blows Away Expectations

The much anticipated Turkey Central Bank Decision is out and it is a stunner:

  • TURKEY’S CENTRAL BANK RAISES OVERNIGHT LENDING RATE TO 12.00%this is the key rate, and it was at 7.75% until now, so an epic 4.25% increase, far greater than the 2.50% expected.
  • TURKEY’S CENTRAL BANK RAISES BENCHMARK REPO RATE TO 10.00% – from 4.50%
  • TURKEY’S CENTRAL BANK RAISES OVERNIGHT BORROWING RATE TO 8.00% from 3.50%
  • TURKEY CENTRAL BANK SETS PRIMARY DEALER RATE AT 11.5% VS 6.75%
  • TURKEY CENTRAL BANK RAISES LATE LIQUIDITY WINDOW RATE TO 15%

This is what a shock and awe move is. And it better work.

Some other notes:

  • Turkey will fund via one week repo rate in period ahead instead of marginal funding rate;
  • Turkey decided to implement strong tightening for price stability, to simply operational framework;
  • Will maintain tight monetary policy until clear improvement in inflation outlook
  • Sees inflation at 5% in mid 2015 due to this stance.

For now the TRY (as well as the USDJPY and thus, equity futures) is loving the move, plunging 500 pips against the dollar.

Here is the bottom line: a $10 billion taper (out of $85 billion) just caused Turkey to hike its rate by 4.25%. This is just the beginning.


    



via Zero Hedge http://ift.tt/1bwvUHv Tyler Durden

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