Thursday, January 15, 2009

The CBT has done it again

I think I was too hasty when I likened the rate ploy in Ankara to Casino Royale last month. Or maybe I was just being preemptive, as the Bank widely exceeded market expectations of a cut of 50-100bp (I saw one guy predicting 125bp, but that was the highest) with the 200bp cut today.

The Bank is definitely in a better position to judge the economy and particularly inflation than I am (or anyone else is for that matter). So I would like to think that they know what they are doing, and they probably are with a high probability. But given the current turbulent markets, I would even be worried even if that probability is well over 1/2 or even very close to unity. If you are wondering why I am concerned, have a look at my Hurriyet Daily News column right after last month's cut or more recently this past Monday.

More on this later, but all this makes me wonder whether the Bank is about to change its operational structure and take the one-week repo rate as the policy rate soon, as it said it would in case of a tightening or permanently higher liquidity squeeze...

No comments: