This week, Turkey’s credit rating will be evaluated by Moody’s and CBRT Governor Erkan’s meeting with investors abroad, which Minister Şimşek decided not to attend at the last minute, will be monitored. These are the important details of the agenda, but there are other important developments.
Due to the Houthi attacks in the Red Sea that jeopardized shipping, major container carriers are changing their routes. Most recently, Maersk suspended its Red Sea route. Of course, this will lead to longer transportation times and therefore higher prices. A US task force is deployed to the region as well.
We see that delivery times get longer not only on the seas, but also on land and rail routes. All of this will add to the cost of global trade, which is already on a knife edge. Of course, this is not good news for inflation. We need to look closely at whether the Fed and the ECB, which say “we have broken the back of inflation”, will change their tendency not to raise interest rates in the face of rising prices in global trade.
Since 85% of Turkey’s exports are in the final goods category, we are price sensitive. Therefore, we can say that the increase in transportation costs will put a negative pressure on profitability. The government will definitely need to be prepared for serious freight support. Meanwhile, since 90% of imports consist of inputs required for production, it is clear that additional customs duties will put a whole new pressure on the CPI.
Considering all these risks, there seems to be more than one obstacle to a slowdown in inflation this year. In this case, we will wait for the last quarter of the year to cut interest rates, and we should not rule out the possibility of an interest rate hike by the Central Bank until April. Of course, it would not be wrong to say that we are always on the lookout for premature interest rate cuts.
