Borsa Istanbul’s BIST 100 index painted a positive picture yesterday, rising by 1.05% to 1,755.48, an all-time high, as of Monday’s close.
The Central Bank (CB) may deliver an ‘emergency’ interest rate hike late this year or early next year, leaving the policy rate at 19% in the first quarter of 2022, according to the France-based multinational investment bank and financial services company Societe Generale. However, the bank said such a move won’t satisfy markets and won’t be sufficient to prevent TRY depreciation. “The 400 basis point interest rate cut during the last three Monetary Policy Committee (PPK) meetings have no economic grounds. Inflation expectations continue to deteriorate,” the Societe Generale analysts said in a client note.
The U.S.-based multinational investment bank Goldman Sachs also expects a 100-basis point interest rate cut in December, and an interest rate hike in the second quarter of 2022, according to a statement from the investment bank following the November PPK meeting.
Contrary to these forecasts, the CB indicated they would take another interest rate cut last week in the PPK statement after it lowered the policy rate by 100 basis points to 15%, despite ongoing high inflation and TRY devaluation.
In the meantime, President Recep Tayyip Erdogan said the government welcomes the interest rate cut at the press conference held following the Cabinet meeting yesterday. “This policy hasn’t suddenly been implemented. We’re determined to do the best for Turkey with our growth-oriented policy, instead of a high interest rate-low foreign exchange (FX) rate policy,” President Erdogan noted. As Erdogan says, they ‘avoided gambling on FX rates’.
Interest rate is the cause, inflation is the effect, according to President Recep Tayyip Erdogan. “This determination is based on the lessons we have learned from what our country has experienced to date,” Erdogan added. Price hikes based on the FX rate increase doesn’t directly affect investment, production, and employment, while competitive power in FX rates paves the way for an increase these factors, according to President Erdogan. “We should act like this, we have to battle against this to economically save our country and nation,” he noted.
USD/TRY, which hit an all-time high of 11.47 following President Erdogan’s statement about FX rates yesterday, broke another record this morning. USD/TRY is trading at 11.86, with a 4.23% increase. The loss in TRY’s value has exceeded 26.2% since September.
DAILY AGENDA
The number of road motor vehicle registrations dropped by 7.9% in October, compared to the previous month, according to the Turkish Statistical Institute (TurkStat). The figure also decreased by 25.1% on an annual basis. 85,691 road motor vehicles were registered in the country last month.
The Central Bank will release the Financial Services Confidence Index for November (2.30 pm).
The Parliament will continue to discuss the 5th Judicial Package.
The Parliament’s Planning and Budget Commission will discuss the 2022 budget for the Ministry of Youth and Sports.
The Parliament’s Industry, Trade, Energy, Natural Resources, Information and Technology Commission will discuss the legislative proposal for the amendment of certain laws, including the regulation to remove the fee incurred by audiences of the Turkish Radio and Television Corporation (TRT).
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