First Impressions from the Erdogan-Babacan-Basci-Summit

TURKEY - In Brief 12 Mar 2015 by Atilla Yesilada
I’m rushing my first impressions from the Erdogan, Babacan and Basci summit which concluded around 8 pm Turkish time last night. A brief statement from Erdogan followed around 9:30 pm. I wanted to pen this so that our Asian readers have something to work with. The summary is brief: Erdogan and his strategy team beat a tactical retreat but stuck to their strategic goal of lower interest rates. CBRT head Basci reportedly made a 130 page presentation, a full account of which in Turkish is on the Bank’s webpage. Erdogan responded with a very brief statement reiterating his sensitivity to (fondness of) lower rates and greater economic production. Hence the first impression is that sides agreed to disagree. Erdogan was joined by two of his economic advisors, Mr. Yigit Bulut and Cemil Ertem. The first gentleman immediately called up a TV channel and spilled out his review. The second gentleman didn't write a column at Star Daily today but expressed his views about CBRT and rates at length yesterday. My commentary is largely based on their views. · Erdogan still wants to run monetary policy and demands lower rates. · Yet he is made to understand that this objective is currently not feasible given the surge of the dollar and EM fears regarding a summer Fed lift-off. · CBRT will be allowed to hold off the rate cut on March 17th MPC meeting. · Yet the longer term goals of zero real rates and less autonomy for CBRT are intact and will be put to play as soon as circumstances allow. I’m only 75% confident in my predictions. Today is critical. First both Bulut and Ertem will chat about their version of the meeting. Then, Erdogan has a chance to comment on it during his now traditiona...

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