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Double-Digit Inflation, Our New Reality
TURKEY · Report · 04 Dec 2017

Consumer prices rose by a more than expected 1.5% in November (versus consensus and roughly our forecasts of around 1.1%), which raised the 12-month rate sharply higher to 13%, up from 11.9% in October. Producer prices rose by a hefty 2% in the month, with the 12-month PPI rate staying broadly un...

Political and Economic Update
TURKEY · Report · 03 Dec 2017

Three days of testimony by Reza Zarrab aired large amounts of dirt about Turkish politics and the shady deals made by some Turkish banks. Needless to say, these are accusations that need to be proven. The horror show is just starting. Once Zarrab is thoroughly grilled, the prosecution will parade...

​Turkish politics just got a lot uglier
TURKEY · In Brief · 30 Nov 2017

While the world is fixated on the earth-shattering revelations of gold trader Mr. Reza Zarrab in the Iran sanctions violations trial of Turkish names, developments at home could possibly wipe off the last vestiges of democracy. I find it hard to believe markets have discounted all the potential d...

​Three banks cited in Iran sanctions case
TURKEY · In Brief · 28 Nov 2017 · 2 responses

With jury selection completed, and Reza Zarrab officially out of the defendants list, the re-named “People of America vs. Hakan Atilla”, or the Iran sanctions trial will take start on Tuesday at 5:30 pm Turkish time, according to the Turkish press. Jurors have been briefed that three Turkish bank...

Our Winter of Discontent
TURKEY · Report · 26 Nov 2017

As Reza Zarrab is believed to be cooperating with the prosecution, odds of a guilty verdict in the Iranian sanctions case against Turkish persons and entities are increasing. AKP admits that the conclusion of the trial could do serious damage to Turkey’s economic interests. Pressure from Germany ...

Into The 4th Episode, Fasten Seat Belts
TURKEY · Report · 21 Nov 2017

The lira has been weakening sharply lately, having broken the previous peak in basket terms, which we had experienced during the so-called “Trump reflation trade” (Graph 1). The Bank has initiated (TL-settled) forward F/X auctions over the weekend. Before that, it tweaked ROCs with a view to prov...

Political and Economic Update
TURKEY · Report · 19 Nov 2017

Turko-American relationship is on the brink. There is very strong (though not conclusive)evidence that gold trader Mr. Reza Zarrab has decided to confess to charges of violating Iran sanctions, which might implicate some Turkish banks and members of AKP elite. AKP is furious, portraying the trial...

Political and Economic Update
TURKEY · Report · 12 Nov 2017

We continue to rate political risk perception for Turkey as high, with the possibility of a further downside. PM Yildirim’s Summit with VP Pence in the U.S. failed to deliver any momentum to the troubled relationship. The upcoming trial of Turkish citizens accused of circumventing sanctions on Ir...

USA relaxes visa ban on Turkey, but tensions fail to decline
TURKEY · In Brief · 06 Nov 2017 · 1 response

USA consulates in Turkey will begin evaluating visa applications two hours a day as of today, after the Embassy posted a statement in its website claiming that State Department had received assurances from Ankara no employees will be detained for political charges. The Turkish Embassy in Washingt...

Political and Economic Update
TURKEY · Report · 05 Nov 2017 · 1 response

We now rate Turkey’s political risk profile as high and rising among peer EMs. The upcoming trial of Mr. Reza Zarrab is likely to throw negative news Turkey’s way. He may have already chosen to cooperate with the prosecution. If this is true, the odds of a guilty verdict for the other defendant(s...

October Inflation: Another Bad Print
TURKEY · Report · 03 Nov 2017

At 2.1%, m/m, consumer price inflation surprised on the upside, with the 12-month rate rising to just under 12% (11.9%), up from 11.2% in September. Producer prices also rose sharply, to 17.3%, from 16.3% a month earlier, attesting to continuation of cost-push pressures and quite possibly, a chan...

CBRT Report: Buying Time, But For What?
TURKEY · Report · 01 Nov 2017 · 1 response

The CBRT has released this year's final Inflation Report today. The 2017 year-end estimate was revised upwards by 1.1 percentage points (pps) to 9.8% (midpoint of a band between 9.3% and 10.3%), from the previous report’s estimate, which, notably, is also higher than the 9.5% estimate in the late...

Winter Has Come
TURKEY · Report · 27 Oct 2017 · 1 response

Last month our Monthly heralded the approach of winter, the cold winds of which began blowing in October. Political conflicts with America and Germany-cum-EU are slowly boiling over to the economy. There is evidence that Turkish banking system might be the target of some type of sanctions, which ...

MPC Tweaks Words, Hopes It’ll Suffice
TURKEY · Report · 26 Oct 2017

The CBRT’s Monetary Policy Committee (MPC) kept all short-term rates unchanged today (one-week repo rate at 8.0%, O/N lending and borrowing rates at 9.25% and 7.25%, respectively; and LLW rate at 12.25%; Graph 1). Although this is exactly what was being anticipated, the news flow in the past 24 h...

Germany reported to attempt financial sanctions on Turkey
TURKEY · In Brief · 26 Oct 2017

Dark clouds are gathering on Turkey’s financial system very quickly. I’ve reported last week that U.S. Treasury Department might be conducting a probe on several Turkish banks on suspicion of violating financial sanctions on Iran. On Wednesday, Bloomberg.com reported that Berlin is using its infl...

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