In the statement made by the Central Bank, it was stated that many steps were taken as part of the process of promoting macroeconomic stability and making market mechanisms more functional. According to this;

-The monthly growth limit for commercial loans in TL was reduced from 3% to 2.5%; Export, investment, agricultural and artisan credits are excluded from this limitation.

-While it reduced the growth limit for vehicle loans from 3% to 2%, it did not change the 3% limit for consumer loans.

-In order to support exporters' access to finance, the rediscount credit limit has been increased to 1.5 billion liras per day, the share of rediscount credits to small and medium-sized enterprises will be increased, and export growth performance will be taken into account in loan disbursement.

The Central Bank reveals that the tightening will not only proceed with the increase in interest rates, but also with the selective measures, the domestic demand will be narrowed. In the evaluation area of the monetary policy, not only within the scope of interest but also within the scope of non-interest instruments, the effect of additional borrowing on the household side and the effect of turning to non-TL investment instruments are tried to be broken. It is also necessary to consider that households are converting their high debt ratios through consumer loans or cash withdrawals from their credit cards. In practice, banks are proceeding not to implement additional limit increases or new demands in instruments such as credit upper limits, KMH. Of course, on the credit card side, transactions such as making a demand for different instruments or making a foreign exchange request can be made through cash withdrawal. Demand in this area is being cut. In this context, similar measures may continue to be implemented within the scope of contraction of domestic demand and credit suppression factors.

Turkish Central Bank Balance Sheet Open Market Operations… Surplus Turkish Lira Weakens Monetary Tightening… The Central Bank borrows a record amount of lira from banks… Source: CBRT, Bloomberg, Dinamik Yatırım

On the exporter side, the exchange rate increase is a positive situation, especially for those who keep a functional FX balance sheet. On the other hand, the fact that the foreign currency has settled in the 27-28 band for a few days does not clearly meet the demands of the exporters in this area. Thanks to the easing in credit financing conditions and the abolition of the 30% foreign exchange sale rule, the exporter is desired to be supported in this way. TL will probably act as a depreciation parallel to inflation starting from next month. The exchange rate may move relatively more stagnantly in the short run due to factors such as external resources from the Middle East, contraction in domestic demand through selective measures, changes in foreign policy, and a decline in the country's risk premium. However, we think that this stability will not be continuous with the acceleration of inflation and there may be a re-acceleration especially with the autumn period.

On the banks' side, after the liraization measures, which the market perceived as negative in the previous period, fixed-rate Treasury debt instruments with a yield of around 10% entered the balance sheets, reducing their asset quality. In the new economy management period, it is observed that the simplification steps are taken into effect gradually, and that these toxic assets are transferred out of the balance sheet without causing active loss in the transition period. For this reason, the Central Bank took interest steps in a limited way in the first place. Although there is some improvement in the loan/deposit spread of banks in the current situation, the fact that private banks will be unappetizing in lending indicates that this gap will not provide a sufficient improvement for the balance sheets. In this environment of financial conditions, banks will reinforce their balance sheets through inflation-indexed Treasury bonds and commissions.

If we look from the point of view of the CBRT; With the announcement of these measures, it is understood that it is not necessary to expect further steps regarding rate hikes. Supporting the monetary policy through selective credit measures other than interest, and the removal of heterodox policies during the transition period to orthodoxy and easing of them all indicate that the gradual understanding will continue. In the coming months, the rate of increase in interest rates may slow down to 150-200 bps, and until the end of the year, limited interest rates can be continued, approaching the 25% band. We consider that the balances established in the current level within the scope of exchange rate, interest and domestic demand will be preserved in the period until the end of the year and local elections.

Kaynak Dinamik Yatırım-Enver Erkan

Hibya Haber Ajansı