Macro and Politics

* We expect the Monetary Policy Committee (MPC) to leave the policy rate unchanged at 46% at today’s rate-setting, while lowering the upper bound of the interest rate corridor from 49% to 47.5%, thereby restoring corridor symmetry. The MPC decision will be announced @ 14:00 local time today. The CBT has already performed an effective rate cut of 300 bps through increasing the size of its weekly repo auctions and lowering the WACF as well as TLREF from 49% to 46%. Hence, we do not anticipate an additional rate cut today as either likely or warranted. Instead, we anticipate a 150bps reduction in the overnight lending rate to 47.5%%, aligning the interest rate corridor symmetrically and effectively lowering the upper bound of market rates. Starting in July, we expect the CBT to embark on a gradual easing cycle, delivering monthly rate cuts of 250bps, with the policy rate likely to fall to 36% by year-end.

* TURKSTAT will release May house sales figures @ 10:00 local time. House sales totaled 118,359 units in April, indicating a 6.8% increase m/m, while registering a sharp rise of 56.6% on an annual basis. Mortgage-backed sales reached 17,465 units, marking a robust annual increase of 147%, despite a 4.2% decline on a monthly basis. The share of mortgage sales in total housing transactions stood at 14.8%. Meanwhile, sales to foreign nationals rose by 13.2% year-on-year to 1,440 units, accounting for 1.2% of total housing sales.

* The CBT will release weekly foreign portfolio flows, money & banking statistics, and international reserves for the period of June 6 – 13 @ 14:30 local time. Based on our calculations upon the CBT’s analytical balance sheet, we estimate that during the week of June 6 – 13, net international reserves increased by USD1.3bn to USD53.4bn, while gross FX reserves edged up by USD3.3bn to USD159.4bn. We anticipate that today’s official reserve data will likely reflect a similar picture in line with our calculations. To recall the data from the previous week: During the week of May 30 – June 6, foreign investors were net buyers of equities, with inflows amounting to USD51.3mn, while they posted a net outflow of USD1.6bn in the bond market (excluding repo transactions). During the same period, the residents’ FX deposits dropped further by USD2.3bn (excluding gold accounts and adjusted for the EUR/USD parity effect), while their total FX deposits (including gold, price adjusted) retreated by USD2.6bn. Besides, within the mentioned week, the CBT’s net international reserves increased by USD2.8bn to USD52.1bn, while gross reserves rose by USD2.7bn to USD156.1bn. Moreover, net reserves excluding swaps climbed by USD2.5bn, reaching USD32.5bn.