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More Macroprudential Measures Announced Saturday

TURKEY
  • On Saturday, the monetary authority released rules that will force banks to bring commercial loans closer in-line with the benchmark policy rate following a surprise 100bp cut on Thursday, Bloomberg report.
  • Banks will be penalised for charging customers too high by having to hold up to 90% worth of new credit in lira locked bonds at the monetary authority in a bid to decrease the divergence between the benchmark rate and commercial rates. These new rules are further evidence of President Erdogan’s intentions of creating a low borrowing cost environment, despite inflation surging to almost 80%, as elections in June near.
  • While industrialists find the decision positive as a precaution against high interest rates, they are concerned that it will lead to a contraction in the loan supply, Dunya report.
  • President Erdogan will chair a cabinet meeting at 1200 BST (1400 local time) and will then speak at a ceremony at 2100 BST (1900 local time). Data-wise, the Culture and Tourism Ministry will publish July’s foreign tourist arrivals at 0900 BST (1100 local time). The previous print saw a 145% y/y increase in arrivals in June. Tourism revenue remains vital to Turkey’s economy to increase forex reserves.

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