In the CBRT November Market Participants Survey, the current year-end inflation expectation is 19.31%. When we look at the short-term inflation expectations; November inflation is expected to be 1.77%, December inflation is 1.32% and January inflation is 1.80%. If inflation increases in line with the expectations in these months, annual inflation in November, December and January will be 19.27%, 19.35% and 19.49%, respectively.
It is observed that the upward revisions in inflation expectations continue at an accelerated pace. Considering that the latest price pressures are due to both global energy and raw material prices and the weak lira; We think that the combined effects rather than the individual effects constitute a layered risk. Therefore, we expect the compelling situation regarding inflationary factors to remain up-to-date. It is seen that it will not be in a comfortable position in inflation after the end of the year. We think that forward-looking inflation forecasts will also be formed in a cautious manner in this direction. The rapid depreciation of the lira in the last period; It seems to have occurred within the framework of the erosion effect on the EM standard and the positioning in a different direction in terms of adaptation to global financial conditions. As long as the conditions we have outlined apply, this lira depreciation can be expected to continue. We anticipate that the volatility of the lira will be effective in inflationary pricing behavior.
According to the average inflation forecasts for the next 12 and 24 months, inflation is expected to be 15.61% and 11.76%, respectively. Thus, the average of inflation expectations for the next 12 and 24 months became 13.69%.
Interest rate expectations in the Repo and Reverse Repo Market were 15.53% for the end of the month. The market predicts the one-week repo rate, which is also the policy rate of the Central Bank, as 15.25%, 14.74, 13.80 and 12.21% in the current month and 3, 12, and 24 month future expectations, respectively.
Although inflation expectations continue to deteriorate, it is observed that the current risk scale does not reflect the expectations of the investors to the Central Bank. In this context, with the expectation of non-traditional Central banking practice perspective, forecasts are formed more on the axis of discourse and action. As a matter of fact, from this perspective, the market expects the Central Bank to continue to cut rates, including the MPC next week. The current guidance of the Central Bank is; As seen in the MPC statement in October, “The Board evaluated that there is limited room for downward adjustment in the policy rate until the end of the year due to supply-side incidental factors.” is in the form. Therefore, we think that the CBRT will not evaluate monetary tightening and will continue to cut rates within the framework of more limited space than in the past. We would like to point out that the risk premium indicators and the volatility of the TRY’s possible depreciation will be challenging in terms of general inflation and policy making. We expect the Central Bank to follow a similar path after the Central Bank cut the policy rate from 18% to 16% with a 200 basis point cut in October, exceeding expectations. In this context, we expect the policy rate to be reduced to 15% with a 100 basis point interest rate cut on November 18.
We see improvement in growth prospects. It is seen that the 2021 GDP expectation, which was 8.9% growth in the previous survey period, increased to 9.2%. The forecast for 2022 was 4.2% growth in the November survey period. Although it is predicted that the economy will grow by 9% this year in the MTP, we anticipate that it will exceed this rate throughout the year. The current views of the government on this issue are; Within the framework of President Mr. Recep Tayyip Erdogan and the Minister of Treasury and Finance, Mr. Lütfi Elvan’s statements, there may be double-digit growth in 2021. We predict an upward trend in the growth path with factors such as supportive domestic and foreign demand in the economy, export outlook, strong norms of industrial production throughout the year and increasing economic activity. We think it will sit.
In terms of current account balance, we have revised our expectations more positively after the September data announced yesterday. In this context, We think that the annual current account deficit expectation of 15-17 billion dollars, which was recently stated by the Governor of the CBRT, Mr. Şahap Kavcıoğlu in the Planning and Budget Committee of the Grand National Assembly of Turkey, will be positively exceeded, and we foresee a current account deficit of 14 billion dollars throughout the year.
Exchange rate expectations are 9.98 for the end of 2021. We see that the exchange rate expectations for the next 12 months are 10.93. We think that the exchange rate expectations will be revised to higher levels in the following survey periods with the realizations in the last days.
Kaynak Tera Yatırım
Hibya Haber Ajansı
Kaynak: Hibya Haber Ajansı