The Central Bank of Turkey said on Monday that its monetary policy committee (MPC) would meet 28 January (Tuesday) evening to discuss recent developments and take the necessary policy measures for price stability. The decision will be announced at 24:00 and the press release will be posted on the Bank's website, the Central Bank said. The markets are now expecting a rate hike at tomorrow's MPC gathering. The Bank last week kept its rates on hold but said that interbank money market interest rates will be 9% during additional monetary tightening days, instead of 7.75%. TRY sank to a new record low of 2.39 against the dollar in early Monday trading as additional monetary tightening failed to support local currency. The Central Bank did not open a repo auction on Monday (a day of additional monetary tightening) and it was funding the market at 9%. TRY firmed to below 2.33 against the dollar after the Central Bank called an interim MPC meeting. The markets want the Central Bank to drop its unorthodox/complex policies and cry out for a traditional interest rate hike. But apparently the Central Bank is under political pressure since a rate hike would mean slower GDP growth that is something the government wants to avoid ahead of the crucial elections in March which are now widely seen as a "vote of confidence" for embattled PM Recep Tayyip Erdogan and his governing AKP. There are two main triggers for the recent TRY sell-off; the corruption scandal/political turmoil and concerns that FED may announce this week that it would scale back its stimulus further. TRY has come under pressure, losing around 10% against USD over the past month, as Turkey heavily depends on external financing with a large current account deficit.
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