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Turkey watchers puzzled on policy after central bank chief’s Q&A: report

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Turkish Central Bank Governor Murat Çetinkaya set the Turkish lira wobbling with comments at a press briefing on Tuesday that a new round of monetary tightening may be possible, Bloomberg reported.

But even after the currency trimmed declines, market watchers were still left pondering whether they had learned anything new about the nation’s policy path and foreign reserves.

The lira was little changed at 5.9483 per dollar as of 12:45 p.m. in İstanbul, after losing as much as 0.6 percent earlier. The nation’s 10-year bond yields climbed 57 basis points to 19.95 percent, the highest since October.

Tatha Ghose, a senior emerging market economist at Commerzbank AG in London said, “We welcome their pledge on tightening, but credibility will still be a problem as they have always hesitated in the past; that’s why market reaction is muted.”

Nigel Rendell, a London-based senior analyst at Medley Global Advisors, said: “The governor is doing his best to try and backpedal. By removing the statement last week about further monetary tightening, the central bank undoubtedly spooked the markets.”

“Suggesting the possibility of a tightening cycle in the inflation briefing rings a bit hollow. It still seems the CBRT is unwilling to take the necessary actions to combat structurally high inflation and, unless policy is reoriented, downside risks to the lira will prevail,” Jason Daw, Singapore-based head of emerging markets strategy at Societe Generale SA, said.

Societe Generale cut its lira forecast last week to 6.50 per dollar for the year-end from a prior estimate of 6.0.

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