Page 11 - bne IntelliNews Turkey Outlook 2024

3.0 External Environment
Tightening via both monetary and fiscal policies, launched in 2022, continued in 2023. Currently, all discussions are on when the easing will be launched.
The mood of the global markets is presently tuned into a New Year rally. Until the end of February, the positivity may sustain. Then a reverse will arrive, followed by a recovery.
May is the month that usually runs according to the principle of “Sell in May, go holiday.” Following a recovery, the summer liquidity dry-up then creates a shake-up in August. It is followed by a recovery that takes place by November.
Federal Reserve
The Federal Reserve (The Fed) launched the global tightening cycle in March 2022. As a result, the upper limit of its federal funds target rate (main policy rate) rose to 5.50% in July 2023 from 0.25% in March 2022.
The US state central bank governors currently expect the rate to decline to 4.75% in 2024.
As things stand, the market expects the first rate cut at the market committee meeting to be held in March.
CPI inflation in the US saw 9.1% in June 2023 and gradually declined to 3.1% by November 2022. The Fed targets 2%. It will hesitate to push harder below the 3%-level.
The Fed’s balance sheet (dollars in circulation) declined to $7.7 trillion as of December 19, 2023 from a record $8.97 trillion as of April 12.
The figure stood at around $4 trillion in 2019 (pre-COVID) and at around $900bn in 2008 (pre-global crisis).
The Fed governors continue reducing the balance sheet by $95bn per month ($60bn from Treasury papers and $35bn from mortgage-backed papers).
The Reverse Repo (RRP) account (money supply that is parked back at the Fed by banks) stood at $772bn as of December 22, 2023, down from $2.29 trillion as of December 28, 2022. A record $2.43 trillion was registered on September 30, 2022.
The Treasury General Account (TGA) (money supply that is parked back at the Fed by the government) stood at $732bn as of December 20, 2023, up from $460bn as of December 21, 2022.
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