Reporting from Central Bank of Turkey Economists Meeting
This is quite a feat, given that I am in Marmaris, not in Ankara, where the meeting is being held, and I am persona-non-Grata in these meetings in the first place… However, thanks to my spies, I always learn what is discussed at these meetings.
I should start by saying that there isn’t much new (see here for the presentation). Attendance was not as high as in earlier meetings (Ankara winters are horrible, so I don’t blame anyone for not making it), and the Q&A session was not nearly as exciting- no lashing out at foreign investment banks this time:)…
The bank says its man concern is controlling credit growth and ensuring a secure landing. On the other hand, in answering a question on whether we should wait to see a decline in inflation or credit growth for easing, Hakan Kara, head of research, while not speaking clearly, said that current credit growth levels (FX-adjusted 10 percent for consumer credit, 20 percent for the rest) were reasonable. So the priority seems to be inflation, but just the fact that I am writing “seems to be” means the Bank is not doing a very good job on communication. To illustrate, the Bank also said that they don’t need further tightening and that they would tighten should credit growth pick up.
As for inflation, Governor Erdem Basci noted that, although there is a possibility of further secondary effects to the exchange rate (the infamous pass-through), the current lending rate (which could go up as high as 12 percent) is high enough, so the Bank is not considering higher rates at this point. The Bank even mentioned that there would be easing in case of a credit crunch. As a confused observer, I have to ask: What if there is a credit crunch and inflation is still high?:) Finally, and not surprisingly, especially if you read CBT’s take on November inflation (in Turkish), the Bank put the blame on unprocessed food prices and FX-passthrough for the recent rise in inflation.
One of the attendants asked the Bank whether the tight monetary policy would slow down growth. The CBT responded, correctly IMHO, that this is the least of their worries at the moment. EFG economist Haluk Burumcekci, talking to business channel CNBC-e after the meeting, noted that he saw this as an indicator that the Bank is expecting neither a recession nor high growth next year- Burumcekci put the CBT’s growth forecast for next year, which the Bank does not disclose, in between 0 and 4 percent.
In general, the Bank is not trying to reveal much- at least that’s the impression I got from talking to my contacts and listening to the economist interviews at CNBC-e and its rival Bloomberg HT. When asked about different scenarios, they are saying “we’ll have a look when that scenario materializes”. Now, I am sure they have considered all those different scenarios, but they want to give the impression of a wait-and-see strategy.
Other items came up in the Q&A session as well: Regarding the reserves, the CBT maintains they are strong, contending that they are enough to cover the Treasury’s liabilities. OK, but I would hardly say that is a generally-accepted criterion for the strength of a country’s reserves. Someone asked about the auction outlook for the heavy Treasury borrowing schedule in the first three months of 2012, given that November auctions had not gone too well. Basci notes that as Treasuries are used as collateral for borrowing from the CBT, there will not be a significant demand problem.
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Here is a sample of analyst reports of the meeting, complements of newgroup Paratrend:
And in case you would like to know about how I prepare these links: