Morning Note /
Turkey

Turkey: Market participants expect the MPC decision today

  • It doesn't matter whether there is a 100bps cut or if it stays on hold, as real TL rates are deep in negative territory

  • If low rates were the answer to salvation, we should have cut to 10% back in September

  • Questions about banks' CAR with ever depreciating Lira are natural these days

ATA Invest
16 December 2021
Published byATA Invest

Not much to say anymore as the Lira trades like a yo-yo with ever depreciating trend. Market participants expect the MPC decision today but it does not matter anymore, whether there is a 100bps cut or if it stays on hold, as real lira rates are deep in negative territory already and it get even worse, climbing above 12% even with current policy rate.

Can the whole system continue to function with such high negative Lira rates, punishing Lira savers, pushing inflation to above 30% and then try to bring regulatory controls to ease it? If low rates were the answer to salvation, we should have cut it to 10% back in September, shock the system, get a huge devaluation and then wait for things to reach to an equilibrium.

Questions about banks' CAR with ever depreciating Lira are natural these days but CAR impact is calculated with the 252-day average, hence we are not there yet to feel the impact for good in 4Q but it will quickly become visibly erosive in 1Q22 & 2Q22.

Company news:

*SAHOL TI> bought back 300K shares at an average price of TL15.49 on 15 Dec 2021. Since 09 Nov 2021, the total number of shares bought back reached 4.8mn at an average price of TL13.74.

Weekly Agenda:

Dec 16: MPC one-week repo rate decision (Consensus 100 bps cut to 14%)