Central Bank got lucky… Thanks to the early elections

“Central Bank got lucky… Thanks to the early elections…”

I talked to the press yesterday: “A lot of people were waiting for the elections to engage in investments. Thus, pressure would be eased and early elections would work for the benefit of the economy”. I made this statement three hours before President Erdogan’s election calendar statement, and I added:

“I have something to say to those claiming that early elections will hinder the fight against the inflation. If an early election is considered to bring inflationist impact on the economy, public sector will be inclined to spend more money no matter how far the elections are… Therefore, an early election would help eliminate economic uncertainties. So, the earlier, the better… As an economist, I find it very reasonable that the elections are set to an earlier date. “

Due to the fact that July 15 has fallen on a sunday since the last few months of 2017, I’ve always emphasized the possibility of an early election. At this stage, Turkey is going to hold elections for Presidential System even earlier than 15 July.

“Markets seem happy…”

The positive trend in USD/TRY, Benchmark Rate and BIST is a clear indicator of markets’ content about the early elections on June 24. My guess is that real sector too will be positively affected by this decision as most of the industrialists have been postponing or cancelling investments under the pretext of political uncertainties. Now, there will be no obstacle to increase capacities.

The sudden positive trend in markets has helped Monetary Policy Committee (scheduled to convene on April 25) breath a sigh of relief. It looks like the pressure on the CBRT about whether interest rates should be hiked or not will slowly disappear.

So, early elections has been a real life buoy for the CBRT Administration. Acting on good intentions so far, CBRT was in fact using all its remaining energy. Now, there’s a light at the end of the tunnel, both for CBRT and the financial markets.