Turkey’s MPC dodges tightening, Hungary’s flags easing

The Turkish central bank’s decision to keep interest rates unchanged despite the worsening inflation outlook underlines the extent to which political pressures seem to be bearing on the MPC. The Council may be able to get away with this in the current environment of low oil prices and a more dovish Fed. But we’re concerned that the damage to the Bank’s credibility could put the lira under pressure further down the line. Elsewhere, the Hungarian MPC also kept its policy rate on hold today, but its press release hinted that monetary conditions will be loosened. As a result, we have pencilled in modest rate cuts.