Page 9 - TURKRptOct21

● Corona: Tourists came but not enough to satisfy Turkey’s needs. New restrictions are on the way due to a new peak, which will hit domestic demand again.
● Erdogan pushed his luck again.
July 29: The central bank hiked its end-2021 inflation forecast to 14.1% from 12.2% in April. Also, the upper limit on official inflation was moved up from 14.4% to 16%, closer to market expectations.
Following the latest rate cut, the market now demands an end-2021 inflation closer to 20%.
According to the updated medium term programme released on September 5, the government foresees end-2021 official inflation at 16.2%.
Following the latest lira depreciation, Turkey’s official CPI index data does not suggest a declining trend in the foreseeable future.
● Oct 28: New quarterly inflation report and updated inflation forecast.
● November 3: Official inflation for October (September: 19.58%,
August: 19.25%, July: 18.95%, June: 17.53%, May: 16.59%).
● On September 8, Turkey’s central bank governor came up with “core inflation” talk and lira returned back to action. Annual core "C" inflation stood at 16.76% in August and 16.98% in September.
Basic arithmetic suggests Turkey’s official CPI inflation series will suggest sharp rises. Tension in the lira is rising.
● October 21: Monetary policy committee meeting decision at 14h Istanbul time.
September 23: Cut by 100bp to 18%.
On October 21, the central bank, which now only takes note of the “core” figure, has space for another 100bp policy rate cut.
If the policy rate is cut to 17%, then the “core” story will have been consumed.
In those circumstances, TUIK methodology might on November 3 cut the “core” for October ahead of another rate cut by the MPC on November 18.
The last MPC meeting of 2021 is scheduled for December 16.
● Lira loans flow: No big moves.
● USD/TRY: Latest record: 8.9607 on September 29.
Finance industry is calling for some 10s before stabilizing at around 9.50s. The government still has some control.
9 TURKEY Country Report October 2021 www.intellinews.com