Page 8 - TURKRptAug21

● 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 official inflation release for June at 17.53%, suggesting an increase from the 16.59% in May, the market demands an end-2021 inflation of 16%s at minimum.
The new central bank governor Sahap Kavcioglu reiterated a few times in April that inflation would peak at around 17% in April before easing.
In line with the central bank governor’s guidance, the official inflation for May was released at 16.59%, down from 17.14% in April.
Despite the market’s demand for a rising inflation, the government attempted to go over the Plan A.
The thinking was that a rate cut was on the way at the July 14 meeting after the June inflation release on July 5 confirms a declining trend in official inflation.
Following the official inflation release for June, the Plan A is a history now.
The Turkish government is now supposed to keep its policy rate hold at 19% at the August 12 meeting.
At the moment, Turkey’s official CPI index data does not suggest a declining trend by November although the central bank governor in May promised President Erdogan that rate cuts were in the making for July and August.
In the coming period, it will be watched whether Erdogan will attempt to push his luck.
Meanwhile, another currency shock is in the making. The ongoing depreciation of the Turkish lira (TRY) adds to already booming commodity prices, supply shortages and problems seen in logistics.
Actual price increases in Turkey, as a result, just accelerate.
● Oct 28: New quarterly inflation report and updated inflation forecast.
● August 3: Official inflation for July (June: 17.53%, up from May: 16.59%).
● August 12: Monetary policy committee meeting decision at 14h Istanbul time.
July 14: Hold at 19%.
● Lira loans flow: Recently rising.
● USD/TRY: Latest record: 8.8061 on June 25.
Finance industry is calling for some 10s before stabilizing at around 9.50s. The government still has some control.
8 TURKEY Country Report August 2021 www.intellinews.com