Page 82 - TURKRptMay19

September, or possibly July, onwards.
On the other hand, Ozlem Bayraktar Goksen of Tacirler Invest said in a research note entitled “MPC dropped the tightening-biased wording”: “[The MPC] raised the possibility of a rate cut at the next MPC meetings, probably in June, which has been our base case scenario .
"Little on offer for stockpicker". “Both TRY and ZAR [South African rand] have broken important levels this morning with TRY dropping through 5.90 and ZAR through 14.50 but I feel more comfortable buying the latter than the former... At the moment, both mkts offer little for the stockpicker—you're either in or out—but it's difficult to make bets when positioning and sentiment are the only arguments in your favour for owning either mkt. The reason for my preference for ZAR versus TRY is predicated on more orthodox central banking and the probability that its electoral outcome is more positive from a mkt perspective than Turkey's was. Sanctions risk for Turkey is also pronounced,” Julian Rimmer of Investec said in a note to investors, prior to the policy rate announcement. “I don't doubt the Turks will always be able to fund their CAD [current account deficit] but the issue is at what cost? And if you think the [ruling party] AKP has forgiven the opposition CHP for its temerity in winning most mayoral elections [in the March 31 polls], then look up footage of the assault on its leader, [Kemal] Kilicdaroglu... when he attended the funeral for a fallen soldier on Sunday. The Russ[ians] call this 'provokatsiya'. The risk of civil unrest in Turkey's metropolises is still elevated and it would play into AKP hands. Stay bearish,” Rimmer said on April 23.
The one-week repo rate which serves as the regulator’s benchmark was raised 11.25 percentage points last year after the MPC—at that point seen as losing its independence as it came under clear political pressure from the Erdogan administration to provide cheaper money—responded tardily to Turkey’s summer lira crisis. Also on April 25, the central bank’s weekly balance sheet showed that its net international reserves fell to TRY156.3bn ($26.9bn) as of April 19 from TRY162.4bn a week ago. “No longer sure what this means—what is this number? But whatever the CBRT are doing behind the scenes with FX SWAPS with state owned banks, the headline number still dropped USD1.5bn in a week, which is not encouraging given the TRY continued to weaken,” Ash said in a separate email to investors.
Fitch Solutions said the central bank has little room to ease its key policy rate over the coming months , given the need to encourage foreign investor inflows and attract domestic depositors, who have been rushing into dollarisation, into holding lira. It forecast 400 bp in policy rate cuts this year, citing the deterioration in the Turkish economy and waning inflationary pressures. “But the weaker lira and precarious external funding situation will likely mean a longer postponement of monetary easing,” the Fitch Solutions commentary said.
Late liquidity window mystery. Mystery continues to surround the Turkish central bank’s operations. An unnamed bank or banks resorted to borrowing at the central bank’s Late Liquidity Window on April 15 for the first time since June, Reuters reported on April 16. A single use of the facility is not concerning, but repeated use could point to liquidity problems and should be monitored, unnamed bankers told the news service.
Turkish central bank’s expensive “lender of last resort” facility tapped for first time in 10 months. The central bank said it provided Turkish lira (TRY) 3bn ($518.68mn) in funding through this liquidity window late on the day, out of TRY75bn in total funding it supplied the banking system through normal channels. The instance of borrowing was the first time the facility was used since the central bank normalised its policy operations in June last year, just prior to the currency crisis outbreak. The central bank does not disclose the name of banks tapping the facility. Lenders typically avoid it for fear of stigma.
82 TURKEY Country Report May 2019 www.intellinews.com