Experts interpret the PPK decision

► RATE CUT CAN BE BROUGHT TO THE AGENDA

ONUR BAL

“While the level and underlying trend of inflation have been improved with the support of the implemented integrated policy approach, the effect of earthquake-driven supply-demand imbalances on inflation is closely monitored,” the Central Bank (CB) said. Thus, the CB gave the message that the economic impact of the earthquake is closely monitored and the current level in the interest rate is sufficient. A possible slowdown in domestic demand and economic activities in the coming months may bring up the rate cut possibility again. In this respect, the economic data will be monitored.

►NEW FUNDING IS SOUGHT

SEDA YALCINKAYA OZER

The price stability was emphasized despite the banking crisis in the global markets. But the CB emphasized financial stability despite high inflation. There are some expressions in the Monetary Policy Committee (PPK) statement that more different instruments, which can fund exporters without the policy rate change, can step in. “Steps are taken to prioritize financial stability through swap agreements and new liquidity facilities,” the statement read. It isn’t an expression to change the monetary policy or existing policies. But it seems that new funding has been sought especially for the real sector. There are small changes in the statement, however, the general structure was kept within the frame of the expressions represented in the previous PPK meeting. We don’t expect a change in the policy rate until the election.

►GROWTH-ORIGIN POLICIES TO REMAIN

ENVER ERKAN

We observe that the CB has adopted the ‘wait and see’ stance between an economic, which entered the election phase, at home, and the financial market uncertainties abroad. We evaluate that the CB will primarily remain on the growth-origin policies side. Although the foreign trade deficit is very high, the foreign demand with a weak composition may pave the way for the current account deficit to have a high course despite the positive contribution of tourism. Domestic demand won’t bring this effect to a positive point in a period when inflation is high and interest rates remain below inflation. On a loose policy plane, this situation may cause a demand effect on the foreign exchange (FX) side. Moreover, it seems that the effect of the FX-rate transitivity will cyclically be maintained to alternative lira instruments due to the interest rate hikes that can’t be benefitted at all.