CBRT Changed Its Discourse, Exchange Rates Increased

The CBRT changed its discourse, exchange rates increased. The daily increase in the US dollar and Euro exchange rate exceeded 1 percent.

Speaking at the economic meeting of the German-Turkish Chamber of Commerce and Industry, CBRT Governor Şahap Kavcıoğlu, citing other central banks as an example, announced that the Core CPI is based on the monetary policy instead of the headline, and gave the message that the CBRT will determine its monetary policy according to this indicator. Headline inflation peaked after May 2019 with 19.25% in August, while Core CPI, which covers energy, food and non-alcoholic beverages, alcoholic beverages and tobacco products, and gold excluding gold, decreased from 17.47% to 16.76% in August. Kavcıoğlu also stated that they expect a decrease in inflation in the rest of the year, and the expectation that interest rates will be cut in the last quarter of the year increased in the markets. As a result of taking the core CPI as a basis, the CBRT will have continued its over-inflation interest rate policy. The USD/TL exchange rate, which rose to 8.35 yesterday with the rise of the US dollar in the global markets, exceeded 8.48 with a 1.5% premium today after Kavcıoğlu's statements, while the Euro/TL rate rose from 9.87 to 10.02. During the trading day, when the currencies of developing countries decreased due to the US dollar effect in global markets, TL exhibits a negative divergence today as the CBRT switched to the core item in inflation. The exchange rate is trading at 8.45 in the time of writing.