Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Executive Summary
- Dovish tweaks to the January policy statement and political pressure to loosen financial conditions following the devastating earthquakes are likely to lead to a rate cut decision at the CBRT’s meeting this week.
- In its January meeting statement, the CBRT removed guidance that the current level of rates are adequate considering risks to global demand, while President Erdogan once again called for rate cuts ahead of the Presidential and Parliamentary elections.
- Sell-side analysts are split between no change in the key rate and a 100bp cut to 8%.
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Speaking in early February, President Erdogan pledged further rate cuts ahead of his re-election bid this May. “There is a direct correlation between interest rates and inflation,” Erdogan said, citing the slowdown in Turkey’s consumer inflation as proof that his theory holds true. The comments ramped up odds of a rate cut, with finance minister Nebati adding that there will be no reversal of policy following the elections.
Erdogan’s dovish comments came before the devastating earthquakes on Feb 3, the death toll of which stands at more than 40,000 in south-eastern Turkey and neighbouring Syria. While it is too early to accurately estimate the cost of the earthquake on GDP, Bloomberg Economics roughly estimate that public spending on the earthquake may be equivalent to 5.5% of GDP. Oxford Economics said near-term disruptions to activity in the 10 provinces will alone shave off 0.3% to 0.4% of GDP, while newspaper Ekonomi calculate that the reconstruction cost of 130,000 buildings plus infrastructure will reach around $45bln. Accommodative budget policies ahead of the elections - including a 55% minimum wage increase, early retirement for 2m workers and an increase in public sector pensions - should support growth. However, the government is also likely to demand looser lending conditions to aid the nation’s rebuild.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.