What matters on Friday, January 21

The Central Bank (CB) kept the policy rate steady at 14% at the first Monetary Policy Committee (PPK) meeting of the year, in line with the market expectations. However, the CB’s emphasis on the start of the “disinflation” process and the announcement that it would begin a review of the policy framework to prioritize TRY have called the economic world’s attention.

The CB didn’t allude to return to a real interest rate policy and is committed to the expansion of FX-protected TRY deposit accounts and the development of new, inflation-indexed instruments in the coming period, according to daily DUNYA Columnist Tugrul Belli. “Inflation-indexed products are important as the FX-protected TRY deposit accounts don’t protect investors against inflation,” said Belli. Touching on the bank’s statement about the “disinflation” process, Belli added: “Inflation is expected to rise through the summer. Saying ‘disinflationist process’ is optimistic. No condition will emerge where they can make an interest rate cut.”

It doesn’t seem the policy rate is being used as a monetary policy tool and the fight against inflation is being conducted with the Treasury and Finance Ministry, according to the University of Economics and Technology (TOBB ETU) Lecturer and Associate Professor Atilim Murat. “The CB is seen quite passive in the eyes of the market. It’s not that easy to fight against inflation without using monetary policy tools. The CB should step in, but we didn’t see this in the PPK Statement,” Murat noted. He said the CB meant, with the “disinflation” process that inflation will gradually decline as of the summer months.  “The Bank will give a clear message about the monetary policy for the upcoming period in the inflation report to be released on January 27.”

This PPK statement was similar to its previous one, although global central banks have increased their messaging around tightening in the last month, according to Piri Reis University Vice-Rector Prof. Dr. Erhan Aslanoglu. “The possibility that the Federal Reserve’s tightening moves above expectations haven’t been priced yet. We’ve seen a small reflection of the possible effects on the stock exchange,” Aslanoglu said. “The CB previously stated that it would conduct a comprehensive review in the first three months of the year. This meant that there could be no interest rate change at least for the first three months. However, it removed the ‘three months’ expression from the statement. This indicates that a possible interest rate cut may come to the agenda again next month. It’s important in terms of FX rates.”


The consumer confidence index increased by 6.2% from 68.9 points to 73.2 points in January, as compared to December 2021, according to the Turkish Statistical Institute (TurkStat).

The Agricultural Input Price Index (Agricultural-IPI) surged by 36.20% in November 2021 compared to the same month in 2020, according to TurkStat. Agricultural-IPI increased by 8.52% on a monthly basis.

The number of residents who took domestic trips totaled 18.78 million in the third quarter of 2021 (Q3), according to TurkStat. Domestic travel rose by 6.4% in Q3 2021, as compared to Q3 2020.

President Recep Tayyip Erdogan will meet with Independent Industrialists and Businessmen Association (MUSIAD) Chairman Mahmut Asmali and board members of the organization (3.00 pm).


>> The capital held by public banks will be increased by TRY 51.5bn in order to support their capital structure and loan capacities, according to Bloomberg. A top official told Bloomberg that there will be a planned capital increase of TRY 22.5bn for Ziraat Bank, TRY 13.5bn for Halkbank, TRY 13.5bn for Vakifbank and TRY 2bn for participation banks.

>> Foreign investors’ net equity and government debt securities (GDS) and corporate bond sales amounted to USD 55.1m, USD 76.3m and USD 2m, respectively, in the week ending on January 14, according to the Central Bank. Foreign investors’ net equity outflows totaled USD 1.4bn in the last eight weeks.

>> Residents’ FX deposit accounts fell by USD 80m from USD 234.29bn to USD 234.21bn in the week ending on January 14, compared to the previous week, according to the Central Bank.

>> The Central Bank’s net reserves dropped by USD 400m from USD 7.94bn to USD 7.54bn in the week ending on January 14, compared to the previous week. The bank’s total reserves rose from USD USD 109.44bn to USD 109.54bn in the same period.

>> The confirmed number of daily COVID-19 cases have approached 72,000 in the country. Some 71,843 new coronavirus cases and 166 deaths due to the COVID-19 were reported in the last 24 hours by the Health Ministry.

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