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JPM See Further Measures Possible to Strengthen Transmission

TURKEY
  • JPMorgan write that the unwinding of the KKM scheme in Turkey is necessary to allow for monetary policy to work and shift to a somewhat more conventional monetary regime.
  • On further steps ahead, they see a strong possibility that the CBRT will lower or remove the minimum deposit rate requirement for dollar-KKM holders to accelerate KKM unwinds.
  • In addition, the fiscal authorities may help the CBRT via removing tax incentives for corporates in KKMs. The FinMin may lift these tax exemptions to discourage corporates from holding KKMs next year.
  • If these measures are successful in eliminating KKMs, the transmission from the policy rate to the deposit and lending rates, and hence to economic activity and inflation will be significantly strengthened.
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com

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