Page 9 - TURKRptNov21

current anticipation of something above 20%.
● Jan 27: New quarterly inflation report and updated inflation forecast will be released.
● November 3: Official inflation for October. The market assesses the figure must be something above 20%.
(September: 19.58%, August: 19.25%, July: 18.95%, June: 17.53%, May: 16.59%).
● November 18: Monetary policy committee meeting decision at 14h Istanbul time.
Turkey’s monetary policy has entered absolutely unmapped territory since the “core inflation” story ended with the latest rate cut on October 21, when the policy rate was cut to 16%, below what the central bank contends is “core”.
Expectations for the November 18 decision currently stand 50-50 on whether that will be a hold or a cut.
October 21: Cut by 200bp to 16%. September 23: Cut by 100bp to 18%.
The last MPC meeting of 2021 is scheduled for December 16.
● Lira loans flow: On October 25, alarm bells rang after the big state banks announced that they had cut their loan rates in the wake of the central bank loosening. The flow of loans will be the main focus now.
● USD/TRY: Latest record: 9.8595 on October 25.
Since Erdogan changed his mind on his threatened expulsion of 10 western ambassadors during the afternoon of that day, his regime has been defending the 9.60-level. The government still has some control.
● Balance of Payments: For August, the central bank released a current account surplus, if you buy it. As winter is coming, December will bring stronger real outflows in the trade account.
Financial flows stopped; as a result, they are stable. There is not much hot money left. The game is played only among locals. Turks are jittery again as a double digit figure in the USD/TRY is on the horizon.
The current account deficit will be watched as the tourism season ended in disappointment.
It was early in November 2020 when it dawned on the government that it did not have the firepower to continue defending the lira. A sharp U-turn that brought in a new central bank governor triggered hot money inflows from abroad. On March 19, the governor was fired.
Since a new rate-cutting cycle was launched on September 23, the reserves and firepower to defend the lira are in the spotlight again. However, everyone is so bored of this repeating movie. Those who do not have to do lira business just ignore Turkey, its currency and papers.
The feasible USD/TRY limit is currently found somewhere up in the sky but get ready for something of a U-turn somewhere along the way, likely involving the firing of the latest central bank governor.
9 TURKEY Country Report November 2021 www.intellinews.com