Page 11 - TURKRptFeb20

Albayrak said also on January 20 that the lira’s exchange rate should be “competitive” and appeared to pay less heed than might be expected that aggressive monetary easing of the type that has been pursued by the country’s central bank delivers negative real interest rates.
The Turkish lira (TRY) has shed 36% of its value in the last two years, mostly during the summer 2018 currency crisis.
At a news conference, Albayrak said the exchange rate had stabilised but that it should be competitive. Albayrak said little more on the matter, but some economies opt for weaker currencies to strengthen exports.
Bloomberg HT quoted Albayrak as saying that Turkey had previously encountered negative real rates but that what is of real consequence are the nominal rates.
NTV also quoted Albayrak as saying inflation would come down to single digits in 2020 and that he does not anticipate Turkey’s ongoing increase in loan volumes to pressure inflation.
On January 24, Albayrak followed up his remarks by telling Japanese financial daily Nikkei in an interview that the Turkish lira (TRY) is actually competitive at current levels. Albayrak added in the interview that the TRY “looks competitive” at around 5.70-5.90 against the dollar. “When we look at the developments in imports and exports as well as balancing in the current account, the foreign exchange rate looks competitive,” Albayrak said in response to a question from the newspaper on whether he was satisfied with the lira’s recent trading range.
“Broke the number one rule for members of the government—Don't talk about the exchange rate!” added Ash.
Turkey’s balance of payments (BoP) swung to a deficit in November, with a more stable lira, aggressive monetary easing and credit-stimulus policies from the Erdogan administration opening the way to a pick-up in consumer demand and more import flows.
Responding to a question from Nikkei on whether dollar sales by state banks was a way of stabilising the lira, Albayrak said: “Within free-market rules, state banks pursue both the public interest as well as profitability, and this will continue as such.”
Albayrak, who also said that financial stability was “a matter of national security”, added that the switch to an executive presidential system in 2018 had made the banks more active market players, saying: “ All state banks, private banks, the central bank and other institutions started to become much more active market players in this new structure as strong stakeholders and acting in a more harmonious and coordinated fashion for financial stability .”
Turkish state banks have been selling dollars to prop up the lira since last year, especially in times of pronounced volatility partly driven by geopolitical anxieties such as in relation to the October invasion of northeast Syria to drive Syrian Kurd militia from border areas.
Many economists are convinced that the Turkish central bank by now has monetary independence in name only and that it is Albayrak’s father-in-law, Erdogan, who is at the helm when it comes to setting interest rates. But Albayrak said: “I do not deem any of the criticism coming on that matter as noteworthy.”
According to the central bank’s monetary and exchange rate policy text for
11 TURKEY Country Report OUTLOOK 2020 www.intellinews.com