Speaking at the economist presentation meeting organized by the CBRT, Governor Mr. Şahap Kavcıoğlu highlighted the expected downward trend in inflation in the last quarter and the positive contribution of vaccination to economic growth performance. Kavcıoğlu reiterated that they expect the factors that affect inflation temporarily to lose their effect in the short term, and that a significant decrease will occur in the 4Q21 period in this context.
The topics covered in the presentation and our own comments on them;
“Food prices are on the rise in Turkey as well, and non-food inflation was significantly below the headline inflation in July. As in our country, producer prices are high in developed and developing countries.
“The supply constraints caused by the increase in commodity prices and the inability of production to respond to the rapidly increasing demand at the same pace are effective in this development.”
“In the euro area, PPI increased almost 5 times the CPI.”
In the light of these quotations; We can deduce that the Central Bank references narrower indicators of inflation, in other words, by eliminating factors beyond the control of the Central Bank’s policy, in a more prominent way. This shows that a certain decrease is expected in headline inflation when the effects of volatile factors or factors that have a temporary high effect are periodically left behind. The source of this decline will be the base effect in the 4Q21 period, however, we anticipate that we will see a limited effect as the market-based expectations for the end of the year are above the 16% band. The factor that relaxes the market is; the commitment of “interest rate above inflation” and “policy tight to ensure the disinflation trend”. Here; We think that current headline inflation should be taken into account rather than narrow-scoped indicators or expectation-based inflation within the framework of the country’s financial stability factors.
Therefore, we can deduce that the Central Bank has also limited the effect of the transition from PPI to CPI in the context of the inflation potential created by the costs. Another issue; related to the current account. Mr. Kavcıoğlu said that Turkey will have a current account surplus in the rest of the year and that economic activity continued to be strong in 3Q21. Besides the correlation between economic activity and vaccination rate, we will also see economic opening and the increasing contribution of the service sector. Therefore, periodic growth will be strong. In the current account balance, although the effects of strong tourism revenues are determinant, export trends will also follow a good course within the scope of the improvement in foreign demand, unless a global economic shock is experienced. In imports, we may see a limitation on the consumption goods side, but we do not have that flexibility in importing intermediate goods or energy.
Regarding loans;
“When we look at the loan composition, despite the moderate increase in commercial loans, the increase in retail loans is above the desired level. We see that macroprudential measures have a limited effect on retail loans excluding vehicle loans. This situation necessitates the use of an additional instrument other than the policy rate. Additional measures are being considered to limit the increase in personal loans.”
In the near future, we see that there will be a study with the scope of banks about this. There may be banking measures aimed at hardening the criteria for banks’ loan outflows and limiting the growth of individual loans, depending on the situation.
On reserves, swap agreements and deposit dollarization;
“In the April-August period, our gross reserves continued to increase with the contribution of swap agreements, gold from ore purchases, rediscount credits and required reserve steps”
“The improvement in our external balance and foreign exchange reserves is in line with our projections. Our reserves have increased from 85-90 billion USD to 115-120 billion USD with an increase of approximately 30 billion USD.”
“While the recent increase in foreign currency deposits, the strong course in exports, the recovery in tourism and foreign currency, and the effective entry into the system by our citizens living abroad, the increase in TRY deposits continues strongly”
“We give priority to swap agreements with countries with which we have foreign trade deficit”
When we reduce it to a form free of swap and temporary reserve resources, we think that the precautionary principle should be taken as basis in our net reserve amount. While our gross reserves have increased with the contribution from the recent swap agreements and the IMF’s SDR allocation, we believe that the reserve composition under the ownership of the Central Bank will also be strengthened.
We expect inflation, which increased to 18.95% in July and wiped out almost all of the real income, to increase by 0.5% on a monthly basis and to be realized as 18.5% on an annual basis in August. August inflation data will be released on Friday, September 3rd. The next policy meeting of the Central Bank will take place on September 23, one day after the Fed meeting.
Kaynak Tera Yatırım
Hibya Haber Ajansı
Kaynak: Hibya Haber Ajansı
