Page 6 - TURKRptMar21 2

2.0 Politics 2.1 Watchlist
● Global liquidity: Biden’s virus package is still awaited.
“Everything bubble” is bursting. US Treasury bond yields, inflation figures and gold prices will be watched to track whether “a correction” or a managed burst will be achieved or policymakers and the finance industry led by Fed will lose control.
Hard currency printing and pledges for further monetary expansion, meanwhile, continue. However, inflation, particularly over commodity prices, is, on the other hand, thunderously coming.
Policymakers so far claim inflation will be temporary. Global economy has a problem if policymakers do not have a plan to prevent stagflation (high inflation and recession at the same time) risk in case vaccination will not bring a combined production and consumption boom.
● Virus lockdowns and demand conditions in Europe
● Anything tangible called “the Biden risk” does not exist anymore. Brawls over the media on some gummy issues such as “human rights” or S-400 rockets would continue for public relations purposes by both sides but some tangible moves such as serious sanctions are not visible.
Biden has not called Erdogan yet but foreign ministers talked on the phone. The Biden administration wants to bring Erdogan as low as possible but Erdogan would play them like a fiddle when he manages to get his claws into them over some criminal or, as they call in the world of states, “transactional” partnerships.
● DELAYED: March 1: Halkbank court hearing. Higher court accepted Halkbank’s application and its decision is awaited. The case stays politicised.
● April 24: Biden will most probably call Armenian Genocide as massacre but it is a test of his Turkey policy.
● March 25-26 EU Council Summit: May make noise in markets but no significant action is expected.
● September 26: Elections in Germany.
● Corona: Tourism season opening in April.
● On March 3: February official inflation release.
Signals on when the policy rate will be cut.
The earliest chance the officials have to make the case that inflation has entered into a declining trend will come in May (according to market expectation and basic calculations on official data series), ceteris paribus and as long as Erdogan does not attempt to push his luck.
The May inflation reading will be released on June 3, but Erdogan may launch a rate-cutting process earlier.
Current market expectations suggest an end-2021 official inflation at over 10% while the central bank has a 9.4% target, just shy of double
6 TURKEY Country Report March 2021 www.intellinews.com