Under normal circumstances, assuming the position of deputy governor of the Central Bank, a name that would not disrupt the markets, has accelerated the sales wave in Turkish lira because of the way it was appointed.
After the termination of President Ağbal’s term, which was short-term and deemed successful, with a decree at midnight, the effect of the earthquake on the Turkish lira did not come to an end, despite criticism on this issue, President Erdoğan replaced his vice president this time with the same method.
Mayor Kavcıoğlu, who announced that he will hold a meeting with local and foreign investors on April 1, will not be of much value due to the current management crisis that they will write in their long-awaited presentation. It has become a general expectation that the president approved the April 15 MPC meeting without any change in the interest rate.
Atilla Yeşilada predicts that the new president will have to raise interest rates when the TL / dollar changes to 8.50. However, if this step is taken, the number of weeks or months that Kavcıoğlu will remain in office is a matter of immediate discussion, even if there are interest rate hikes, which may limit their effects.
The TL / dollar, which returned from the 8.38 levels in the morning, registered 8.46 in the middle of the day, reflecting the discomfort of domestic and foreign investors regarding the economic management style.
While the Turkish lira left developing currencies significantly negative, it has depreciated 15% since Naci Ağbal was fired on March 19. Although the effects are not seen immediately in April, the seasonal effects and the expected moderation in CPI inflation, which is expected to soften with the stability achieved in the LT since the beginning of November 2020, is of a magnitude which will avoid this depreciation of the LT.
In fact, it is important to add that CPI inflation is 20% or more.
It is very likely that a presentation will be made on April 1 that emphasizes price stability and the 5% target, similar to Kavcıoğlu’s statements in the first days when he took office. However, the central bank’s management of the economy and monetary policy in the case of Turkey have passed to a stage where words suffice, the frequency of intervention. Statements by advisers such as Cemil Ertem and Yiğit Bulut further undermine the position of governor of the central bank.
On the other hand, the absence of the expected Cabinet review and rumors that former Minister Albayrak will be appointed to the post of Chief Advisor to the President in charge of the economy have completely nullified the effectiveness of monetary policy. It is even necessary to emphasize the absence of a monetary policy.
The reason Albayrak upset the markets so much is the loss of value of the Turkish lira as a result of the unorthodox steps he took as an economic precaution and the ideological power struggle with investors during his tenure as Minister of Finance and Finance. Non-transparent Central Bank reserves down to -50 billion USD net, excluding swap sale methods to secure the value of the TL, stress and evolved to an unsustainable stage of the rate cuts of the Turkish economy during this period can be summarized as this corner of the first steps of unorthodox policies.
In this case, the continuation of the depreciation in TL is unavoidable. It is not easy to say that we have reached a point where even interest rate increases will not work, but it will not be possible to say that such an Argentine state of affairs has increased among the risks.