Page 10 - TURKRptFeb22

● February 17: Monetary policy committee (MPC) meeting decision at 14h (?) Istanbul time.
January 20: Hold at 14%.
On December 16, the MPC stated: “The cumulative impact of the
recent policy decisions will be monitored in the first quarter of 2022.”
On January 20, the MPC instead said: “While the cumulative impact of the recent policy decisions is being monitored..., the comprehensive review of the policy framework is being conducted with the aim of prioritising Turkish lira in all policy tools.”
So, it is assumed that the benchmark will be kept on hold in February. That ‘hold mood’ might then last beyond the conclusion of Q1 at the end of March or another cut may be made in March.
If the speculation suggesting that Erdogan wants a monthly mortgage rate of 1% proves correct, a 12% policy rate (banks’ funding cost) would be below the annual compound rate of about 13% that the 1% monthly rate implies.
Some speculation suggests that Erdogan wants a single-digit policy rate.
December 16: Cut by 100bp to 14%. November 18: Cut by 100bp to 15%. October 21: Cut by 200bp to 16%. September 23: Cut by 100bp to 18%.
● Lira loans flow: Since December 20, monetary conditions in Turkey have in fact tightened even though the policy rate has been kept on hold. From the second half of January, the Erdogan regime again started utilising the public banks to ease monetary conditions.
After the pumping in of around 100bn of lira loans in both November and December, net lira creation remained high at TRY59bn in January.
More lira loans mean more FX demand.
10 TURKEY Country Report February 2022 www.intellinews.com