The surprise matters alongside the decision
Market prices reflect expectations of future interest rates as well as today’s level. A currency can weaken after a hike or strengthen after a cut if the action differs from expectations or the communication changes the expected path. Separate the announced decision, pre-decision expectations and new guidance. A survey or market-implied expectation is an estimate, not a commitment by the central bank.
The policy rate is not your account rate
Policy rates influence bank funding conditions, but pass-through to deposit and loan offers need not be immediate or equal in size. Maturity, customer terms, collateral, liquidity and competition matter. An existing fixed-rate contract differs from a product resetting tomorrow. To estimate a budget effect, inspect the contract and the effective date of the new offer rather than applying the headline policy change directly.
| Channel | First indicator to inspect | Why it is not one-for-one |
|---|---|---|
| Deposits / loans | New offer and reset date | Bank funding, risk and competition |
| Bonds | Yield by maturity | Future rates and risk premia |
| Currency | Relative outlook of two economies | Prior expectations and capital flows |
| Equities | Financing costs and demand | Sector and company debt structure |
A simple example of a 100-basis-point change
One percentage point equals 100 basis points. Moving from 40% to 39% annually is a one-point cut, not a 1% relative reduction. On a hypothetical TRY100,000 for 32 days using a 365-day basis, the gross interest difference is 100,000 × 0.01 × 32 ÷ 365 = TRY87.67. Taxes, fees and compounding are excluded, and the bank offer is assumed to change by the same amount. Actual net effects depend on terms.
Read bonds, currencies and equities separately
A higher market yield generally reduces the present value of a bond’s fixed cash flows, with sensitivity depending on timing and maturity. Currencies reflect relative interest-rate and risk conditions across economies. Equities require a joint assessment of financing costs, pricing power, debt maturity and revenue exposure. Banks, exporters and indebted industrial firms need not respond identically. A single directional rule loses those differences.
A reading order for decision day
Start with the official decision and its effective date. Compare the wording on inflation, demand and risks with the previous statement. Press conferences, projections and later minutes provide different information. Measure the immediate reaction separately from the close because other data may arrive in between. Finally return to the reset date and terms of the instrument being assessed. A policy decision alone does not determine future returns.
Related market pages and tools
Sources and further reading
Numerical examples are illustrative scenarios, not company data, bank offers or current tax rates.
This content is general information and financial education. It is not personalized investment advice or a recommendation to buy or sell.