Yesterday marked my first appearance on TV100 as a commentator. After a warm welcome, they let me underline the key hot topics on Turkey’s agenda.
I do not want to say much about the cancellation of Istanbul election which was won by the Opposition. I said live on television yesterday that any decision which is detrimental to society’s moral compass would let everyone down and shatter market calm. I think re-running Istanbul election will definitely lead us to run an early election.
It can be observed that markets are considerably affected not only by economic issues but by diplomatic/political decisions as well, which are CBRT reserves, Inflation Rates, escalating tension with the United States.
Using our technical knowledge, we can easily understand what’s going about the Turkish Central Bank Reserves but press still seems to be focused on this issue. As a matter of fact, CBRT can take an emergency action using a sum of around 9.5-10 billion USD. If Public Deposit is also included, the total sum may amount to 16-17 billion USD. Obviously, it can temporarily increase its reserves in exchange for gold deposited abroad or by making a currency swap. However, normally Central Banks should avoid using such methods in reserves saving. Although CBRT declares that they do nothing illegitimate, the thing they actually do can be rather defined by a saying that we almost always use, “Allowed by Sharia law but it’s religiously unacceptable”, which means it’s inappropriate to increase reserves using such methods. After all, swap transactions involve definite durations of the swaps. When the term is due, foreign currency will come back.
Another thing that has been heavily criticised lately was the fact that CBRT injected a huge amount of foreign currency out of its own reserves into the public sector. CBRT is spending out of its own pocket in order to prevent public demand from exerting pressure on foreign exchange market, which naturally results in a big decline in reserves. CBRT tries to increase its shrinking reserves with provisional transactions.
“Escalating tensions with the United States…”
The desired improvement hasn’t been achieved yet despite recent decline in inflation rates. CBRT can’t possible cut interest rates based merely on this data. I expect them to make another assessment in July observing May and June inflation statistics. That is to say, I do not anticipate any further rate cut at June meeting.
According to some sources, things seem relatively calmer regarding the S-400 and F-35 issues and a mutual understanding can be achieved between Turkey and the United States. In the meantime, we were upset by the recent incidents in Syria. We strongly condemn Syrian Army’s provocative actions against Turkish Army. While Russia is backing Syria, terrorist elements in the regions are supported by the United States, which strengthens my opinion that an “unconventional foreign policy” is applied in the Middle East.
Meanwhile, the United States called Turkey’s intention to drill off Eastern Mediterranean “provocative”. According to this statement, US warship may enter eastern Mediterranean to send message to Turkey. Tensions are sadly escalating between the two countries. Unfortunately, any of the previous problems can’t get solved, while new problems keep piling up every day.