20171206-法国巴黎银行-Morning_Meeting_Notes_8页_424kb

Summary of EM STRATEGY | TURKEY DESKNOTE (06 December 2017)

Core Content

This document is a Morning Meeting Notes from Turk Ekonomi Bank A.S., providing insights into the Central Bank of the Republic of Turkey's (CBRT) monetary and exchange rate policy, as well as the current state of the Turkish Lira (TRY) and related financial instruments.

Main Points and Key Information

1. CBRT's Inflation Outlook and Policy Stance

• The CBRT remained cautious about inflationary pressures in the inflation note, indicating the potential for monetary tightening at the MPC meeting on 14 December.
• The core inflation trend is still rising, even after excluding temporary factors such as changes in the clothing price group weights and the end of tax cuts on durable goods.
• The report aligns with the expectation of a 50bp hike in the average repo funding rate to 12.75%, and a 75bp increase in the late liquidity window rate to 13.0%.

2. Monetary and Exchange Rate Policy for 2018

• The CBRT announced the Monetary and Exchange Rate Policy for 2018, but did not include any new policy message.
• The MPC meeting dates for 2018 were outlined, with the first MPC meeting on 18 January, one week earlier than in 2017, increasing the CBRT's flexibility to respond to market volatility.
• The CBRT plans to increase its bond portfolio by TRY 1bn to reach TRY 16bn by the end of 2018.
• Bond purchases will occur on Monday, Wednesday, and Friday with an auction amount of TRY 150mn per day, while redemption is TRY 5.8bn.
• The CBRT continues to target the 1-week repo rate as the main funding instrument, but there are no immediate plans to implement a single policy rate.

3. Real Effective Exchange Rate (REER)

• The REER declined to 84.7 in November, the lowest since 2003, indicating the TRY is at excessively weak levels.
• The report estimates that the November REER is the lowest since September 2002, when using BIS data.
• This suggests that the TRY is undervalued, and the CBRT may need to take further action to stabilize the currency.

4. Market Data Overview

• Foreign Exchange Market and Swap Market data is presented, including USDTRY, EURTRY, and BASKET exchange rates, as well as forward implied and XCCY swap rates.
• ATM volatility curves and bond yield curves are also included, highlighting the current market conditions and expectations.

5. Key Contacts

• The document includes a list of EM strategy contacts, including:
  • Wike Groenenberg – Head of Emerging Markets Research, CEEMEA & APAC
  • Marcelo Carvalho – Head of Emerging Markets Research, Latam
  • Erkin İşkı, CFA – FX & IR CEEMEA Strategist, Istanbul
  • Other strategists in London and Singapore

Conclusion

The CBRT is expected to continue its monetary tightening in response to inflationary pressures, with the MPC meeting on 14 December likely to see rate hikes. The REER has reached its lowest level since 2002, indicating the TRY is undervalued. The CBRT's bond purchase program for 2018 is well-defined, and the repo rate remains a key policy instrument. The report also includes market data and contacts for further analysis and discussion.