We can say that the CBRT has built confidence in two important points in the video conference "Exchange and Monetary Policy in 2021". Chairman Mr. Naci Ağbal made statements reflecting the school change of the Central Bank regarding the issues that the public is curious about. In this framework, we see that in an economic environment where inflation risks are taken into account, policies will be tight enough and serious work will be done to support reserves.
Due to the weak TRY on inflation, the effect of commodity prices and seasonal / climatic effects, the upward pressure is at the forefront. Recent realizations highlighted the upward trend of inflation. At the same time, TRY levels, the stickiness effect on inflation and the effect of cost increase in PPI show that this inflationary pressure will continue in the near months. In this environment, it was an important direction to keep the policies tightly enough in 2021, to make additional tightening if necessary, and to state that the policies will continue in this way until serious indicators are obtained that the decline in inflation becomes evident. We can say that the Central Bank has built up confidence in this regard in terms of forward-looking guidance.
Adherence to orthodox monetary policies is also important. Ağbal put an end to the complexity of different instruments and channels that constitute the funding rate in the first MPC after taking office. A single policy interest rate was applied. This rate was determined as 15% within the framework of the balances in that period. In fact, it was not a tightening in practice; because the current interest rate had already been brought to almost those levels with indirect policies. If the inflation outlook and trend will go to a point where the current interest levels are not sufficient, then the Central Bank should give a policy response in terms of additional tightening. In this framework, the different approach adopted requires the implementation of strong and proactive policies to reduce inflation to the targeted low levels. We expect the Central Bank to raise the interest rate by 200 basis points on December 24 and to hold tight financial conditions in the first half of the year.
Guidance on increasing reserves was also important. It seems that the roadmap the Central Bank will follow at this point will be shaped in the near future. The important point is; The Central Bank will not buy or sell to determine the exchange rate level or to determine the direction of the exchange rate. In other words, free market operation will not be interfered with, there will be no sales from reserves in order not to increase interest rates, and market actions that will disrupt the balance of foreign exchange with supply and demand will be avoided. The Central Bank reserves the right to intervene only in extreme fluctuations disconnected from economic fundamentals. For the foreign exchange buying auctions, the foreign exchange supply in the market is expected to significantly exceed demand. In the upcoming period, when capital inflows accelerate and we see the deposit de-dollarization, the Central Bank will have a more comfortable leverage for direct foreign exchange purchases in terms of strengthening the reserves. The positive reserve effect of rediscount loan repayments, which is estimated to be around $ 21 billion in 2021, is expected.
The Central Bank also states that the Bank will get together with economists and economic stakeholders more, publish more frequent data on reserve management and CBRT market transactions (OMO, swap, etc.) and use ancillary instruments for its purpose. While liquidity management instruments such as RR will be used effectively, we see that the late liquidity window or the interest rate corridor will not be used as the main policy rate, as in the past. The fact that funding will continue to be carried out at a single valid policy rate is important in terms of adherence to orthodox and simple applied monetary policies. In the new period, we see a Central Bank with strong communication, promising more transparency and accountability, determined and committed to its plan.
“Burada yer alan yatırım bilgi, yorum ve tavsiyeleri yatırım danışmanlığı kapsamında değildir. Yatırım danışmanlığı hizmeti, yetkili kuruluşlar tarafından kişilerin risk ve getiri tercihleri dikkate alınarak kişiye özel sunulmaktadır. Burada yer alan yorum ve tavsiyeler ise genel niteliktedir. Bu tavsiyeler mali durumunuz ile risk ve getiri tercihlerinize uygun olmayabilir. Bu nedenle, sadece burada yer alan bilgilere dayanılarak yatırım kararı verilmesi beklentilerinize uygun sonuçlar doğurmayabilir.”
Kaynak Tera Yatırım
Hibya Haber Ajansı