Macro and Politics

* In a statement made on Friday, the CBT announced that it will issue liquidity bills with maturities of up to 91 days, with auctions starting today. The issuance of liquidity bills is among the tools being employed to withdraw excess liquidity from the market, with the Bank taking an additional step towards increasing overnight interest rates. It is worth recalling that in his presentation of the November 8^th Inflation Report, CBT Governor Karahan remarked that the liquidity bill channel is open to foreign investors as well, and since foreign investors typically exchange foreign currency for TL to purchase liquidity bills, the sterilization effect may be less effective. For this reason, the use of liquidity bills was not preferred at that time. However, in light of the current volatility in TL assets, it is evident that liquidity bills have now been incorporated into the Bank’s toolset.

*The Consumer Confidence Index increased further to 85.9 in March, up from 82.1, marking the highest level since May 2023. Accordingly, after averaging 80.6 in 4Q24, the index has materialized at an average level of 83 in 1Q25. Following weak signals of economic activity reflected in January’s leading indicators, the February data pointed to a renewed recovery. In March, the accelerating uptrend in consumer confidence signaled a continued improvement in activity. In the coming period, close attention will be paid to how recent idiosyncratic issues and heightened market volatility since last week have influenced the leading indicators for April. As per the sub-categories of the March data, the index related to the financial situation of households at present increased from 65.6 to 70.9, while the general economic situation expectation index over the next 12-month period edged up from 79.3 to 84.6. Moreover, the financial situation expectations of households over the next 12 months index climbed from 83.1 to 84.7 level. Lastly, the sub-index related to the assessment on spending money on durable goods over the next 12 months compared to the past 12 months period, which is an important leading indicator in terms of domestic demand, increased from 100.3 to 103.2.