CEEMEA: Central banks in Turkey and Israel to hold rates

The Central Bank of Turkey (CBT) is expected to keep its policy rate unchanged in its November MPC meeting next Tuesday, but still expect an acceleration of the "simplification" of monetary policy with the expected Fed hike in December. The new policy mix will result in an overall easing of domestic monetary conditions. But the vulnerability of the CBT to political pressures is high. Therefore, in case of a politically motivated (premature) easing, the simplification of monetary policy could be delayed or interrupted.

In Israel, BoI appears to have decided to not delve into negative interest rates and therefore is probably prepared to keep its policy rate on hold for an extended period, until inflation drifts back into the 1-3% target. With the government actively trying to lower costs of living, this could be an extremely drawn-out process. The strong GDP reading at 2.5% q/q saar takes some pressure off the BoI to loosen monetary conditions.