Page 76 - TURKRptJun19

told to simply mouth the words given to him by his president and [the president’s] son-in-law. Cetinkaya also gave a passable impersonation of Hansel and Gretel by backtracking completely on his statement after the MPC last week wherein the hawkish language was removed. He reinstated it [on April 30] but the net effect of his monetary hokey-cokey is simply to diminish already depleted reserves of credibility further. Cetinkaya also added that reserves could build very rapidly but that's like me saying I expect a surge in commission revenues in May after the cruellest month of April. I'd like it to happen but it won't.”
Analysts are warning Turkey’s central bank will have to again raise interest rates given the renewed pressure that the Turkish lira (TRY) has come under. The TRY has for several weeks suffered another bout of severe weakness in the wake of last year’s currency crisis, and on May 7 the row over the decision to the annul the result of the end-of-March Istanbul election and call a fresh poll was enough to send it past the pyschologically important threshold of six-to-the dollar and to a seven-month low. In response, Credit Agricole warned of a “vicious cycle” that leads to higher inflation and tighter monetary policy. TD Securities, which sees the lira weakening about 20% against the dollar this quarter, has pencilled in 600 basis points of rate increases through the end of July, Bloomberg reported. Political turmoil centred on the election rerun could hamper efforts to revive economic growth in recession-hit Turkey, and wreck hopes of a possible monetary-policy easing cycle being kickstarted soon. The TRY is the worst performer in emerging markets this year to date after the Argentine peso.
The central bank’s rate-setters are scheduled to next meet on June 12, less than two weeks before the new Istanbul election. They last hiked the benchmark rate in September, raising it by 625 bp to 24% in a move widely seen as arriving too late. The one-month forward implied yield on the lira jumped more than 280 bp to 27% on May 7, Bloomberg data showed. The move is more pronounced further along the curve, with the one-year cross currency swap surging to almost 30%.
8.3 Stock market
76 TURKEY Country Report June 2019 www.intellinews.com