1、1 03/07/19 Okan Ertem,Senior Economist|Turk Ekonomi Bank A.S.Turkey Falling from the top of the CPI waterfallKEY MESSAGES We see Junes CPI data as supporting our below-consensus forecast that Turkeys central bank will start a cutting cycle with 100bp at the 25 July meeting.Current CPI trends point t
2、o more aggressive rate cuts;we expect 400bp to bring the year-end rate to 20%.Top of the CPI waterfall:Turkeys June CPI came in at 0.03%m/m,close to our 0.05%forecast,compared with the Bloomberg consensus of 0.20%.The fall to 15.7%y/y from 18.7%in May signals the acceleration of a CPI downtrend.Food
3、 prices(which contributed with about a third of the year-to-date annual inflation)have started to normalise and core goods CPI also began to show significant improvement,which signals FX pass-through effects fizzling out(see Figure 1).Even the stickiest category,services inflation,decelerated to 14.
4、92%from 15.15%.We see this as a major support to our expectation of CBRT rate cuts.Disinflation to halt in July:We estimate various recent price hikes aimed at repairing the budget deficit will add 153bp to Julys monthly CPI inflation:contributions of 12bp from food(sugar and tea),5bp from energy(ga
5、soline and diesel),44bp from utilities(electricity)and 92bp from tax cut reversals(autos,furniture and white goods).Even with the hikes,the real CBRT policy rate might stay around 7%in July,paving the way for rate cuts(see Figure 2).Favourable base effects,due to weak domestic demand(preliminary tra
6、de numbers for June indicate 23%y/y decline in imports)and lower FX pass through(decline in almost all core categories),support the downward CPI trend in Q3.On balance,therefore,we forecast CPI bottoming at 11.5%in October.Inflationary pressures might show some resilience in Q4,as base effects wash
7、out.We think annual CPI will end the year at about 16%,but see the risk as being to the downside.Room for plenty of monetary easing:The inflation trajectory gives the CBRT room for further rate cuts,in our view.We continue to expect the CBRT to start its easing cycle with a 100bp cut on 25 July,with
8、 a series of further cuts bringing the policy rate to 20%by the end of the year.Fig.1:CPI across core categories(annual,%)Fig.2:CPI(%y/y),CBRT policy rate and real rate forecast(%pa)Sources:Turkstat,TEBSources:Turkstat,TEB(dotted lines stand for TEB forecast)14.8 15.40 14.92 91113151702040608005/180
9、7/1809/1811/1801/1903/1905/19Fresh fruits and vegetablesCore goodsServices7.11 4.0 18.7 15.7 16.0 24.0%20.0%0102006/1809/1812/1803/1906/1909/1912/19Ex post real rateCPI InflationCBT funding rateFLASH|CEEMEA3 July 2019 Please refer to important information at the end of this reportEM ECONOMICS|EM STR
10、ATEGY MARKET VIEW We expect stabilisation in geopolitical risk to keep the TRY outperforming peers.Looking at what is priced into the curve over the next 12 months,we think the market might be overly optimistic about the number of rate cuts to come.Therefore,we think a long TRY versus pay rates posi
11、tion could have good risk/reward,given the positive carry on both legs of the trade.(see Turkey:Tactically long TRY and pay 5y rates,2 July)LEGAL NOTICE This document has been written by our Strategist and Economist teams within the BNP Paribas group of companies(collectively“BNPP”);it does not purp
12、ort to be an exhaustive analysis,and may be subject to conflicts of interest resulting from their interaction with sales and trading which could affect the objectivity of this report.This document is non-independent research for the purpose of the UK Financial Conduct Authority rules.For the purpose
13、s of the recast Markets in Financial Instruments Directive(2014/65/EU)(MiFID II),non-independent research constitutes a marketing communication.This document is not investment research for the purposes of MiFID II.It has not been prepared in accordance with legal requirements designed to provide the
14、 independence of investment research,and is not subject to any prohibition on dealing ahead of the dissemination of investment research.The content in this document/communication may also contain“Research”as defined under the MiFID II unbundling rules.If the document/communication contains Research,
15、it is intended for those firms who are either in scope of the MiFID II unbundling rules and have signed up to one of the BNPP Global Markets Research packages,or firms that are out of scope of the MiFID II unbundling rules and therefore not required to pay for Research under MiFID II.Please note tha
16、t it is your firms responsibility to ensure that you do not view or use the Research content in this document if your firm has not signed up to one of the BNPP Global Markets Research packages,except where your firm is out of scope of the MiFID II unbundling rules.STEER is a trade mark of BNPP.MARKE
17、TS 360 is a trade mark of BNP Paribas This document constitutes a marketing communication and has been prepared by BNPP for,and is directed at,(a)Professional Clients and Eligible Counterparties as defined by the recast Markets in Financial Instruments Directive(2014/65/EU)(MiFID II),and(b)where rel
18、evant,persons who have professional experience in matters relating to investments falling within Article 19(5)of the Financial Services and Markets Act 2000(Financial Promotion)Order 2005,and at other persons to whom it may lawfully be communicated(together“Relevant Persons”)under the regulations of
19、 any relevant jurisdiction.Any investment or investment activity to which this document relates is available only to and will be engaged in only with Relevant Persons.Any person who is not a Relevant Person should not act or rely on this document or its content.Securities described herein may not be
20、 eligible for sale in all jurisdictions or to certain categories of investors.The information and opinions contained in this document have been obtained from,or are based on,public sources believed to be reliable,but there is no guarantee of the accuracy,completeness or fitness for any particular pu
21、rpose of such information and such information may not have been independently verified by BNPP or by any person.None of BNPP,any of its subsidiary undertakings or affiliates or its members,directors,officers,agents or employees accepts any responsibility or liability whatsoever or makes any represe
22、ntation or warranty,express or implied,as to the accuracy and completeness of the information or any opinions based thereon and contained in this document and it should not be relied upon as such.This document does not constitute or form any part of any offer to sell or issue and is not a solicitati
23、on of any offer to purchase any financial instrument,nor shall it or any part of it nor the fact of its distribution form the basis of,or be relied on,in connection with any contract or investment decision.To the extent that any transaction is subsequently entered into between the recipient and BNPP
24、,such transaction will be entered into upon such terms as may be agreed by the parties in the relevant documentation.Information and opinions contained in this document are published for the information of recipients,but are not to be relied upon as authoritative or taken in substitution for the exe
25、rcise of judgment by any recipient,are subject to change without notice and not intended to provide the sole basis of any evaluation of the instruments discussed herein.In providing this document,BNPP does not offer investment,financial,legal,tax or any other type of advice to,nor has any fiduciary
26、duties towards,recipients.Any reference to past performance is not indicative of future performance,which may be better or worse than prior results.Any hypothetical,past performance simulations are the result of estimates made by BNPP,as of a given moment,on the basis of parameters,market conditions
27、,and historical data selected by BNPP,and should not be used as guidance,in any way,of future performance.To the fullest extent permitted by law,no BNPP group company accepts any liability whatsoever(including in negligence)for any direct or consequential loss arising from any use of or reliance on
28、material contained in this document even where advised of the possibility of such losses.All estimates and opinions included in this document are made as of the date of this document.Unless otherwise indicated in this document there is no intention to update this document.BNPP may make a market in,o
29、r may,as principal or agent,buy or sell securities of any issuer or person mentioned in this document or derivatives thereon.Prices,yields and other similar information included in this document are included for information purposes however numerous factors will affect market pricing at any particul
30、ar time,such information may be subject to rapid change and there is no certainty that transactions could be executed at any specified price.BNPP may have a financial interest in any issuer or person mentioned in this document,including a long or short position in their securities and/or options,fut
31、ures or other derivative instruments based thereon,or vice versa.BNPP,including its officers and employees may serve or have served as an officer,director or in an advisory capacity for any person mentioned in this document.BNPP may,from time to time,solicit,perform or have performed investment bank
32、ing,underwriting or other services(including acting as adviser,manager,underwriter or lender)within the last 12 months for any person referred to in this document.BNPP may be a party to an agreement with any person relating to the production of this document.BNPP may to the extent permitted by law,h
33、ave acted upon or used the information contained herein,or the analysis on which it was based,before the document was published.BNPP may receive or intend to seek compensation for investment banking services in the next three months from or in relation to any person mentioned in this document.Any pe
34、rson mentioned in this document may have been provided with relevant sections of this document prior to its publication in order to verify its factual accuracy.This document is for information purposes only and there is no assurance that a transaction(s)will be entered into on such indicative terms.
35、Any indicative price(s)contained herein have been prepared in good faith in accordance with BNPPs own internal models and calculation methods and/or are based on or use available price sources where considered relevant.Indicative price(s)based on different models or assumptions may yield different r
36、esults.Numerous factors may affect the price(s),which may or may not be taken into account.Therefore,these indicative price(s)may vary significantly from indicative price(s)obtained from other sources or market participants.BNPP expressly disclaims any responsibility for the accuracy or completeness
37、 of its own internal models or calculation methods,the accuracy or reliability of any price sources used,any errors or omissions in computing or disseminating these indicative price(s),and for any use you make of the price(s)provided.The indicative price(s)do not represent(i)the actual terms on whic
38、h a new transaction could be entered into,(ii)the actual terms on which any existing transactions could be unwound,(iii)the calculation or estimate of an amount that would be payable following an early termination of the transactions or(iv)the price(s)given to the transactions by BNPP in its own boo
39、ks of account for financial reporting,credit or risk management purposes.As an investment bank with a wide range of activities,BNPP may face conflicts of interest,which are resolved under applicable legal provisions and internal guidelines.You should be aware,however,that BNPP may engage in transact
40、ions in a manner inconsistent with the views expressed in this document,either for its own account or for the account of its clients.This document may contain certain performance data based on back-testing,i.e.simulations of performance of a strategy,index or assets as if it had actually existed dur
41、ing a defined period of time.To the extent any such performance data is included,the scenarios,simulations,development expectations and forecasts contained in this document are for illustrative purposes only.All estimates and opinions included in this document constitute the judgment of BNPP and its
42、 affiliates as of the date of the document and may be subject to change without notice.This type of information has inherent limitations which recipients must consider carefully.While the information has been prepared in good faith in accordance with BNPPs own internal models and other relevant sour
43、ces,an analysis based on different models or assumptions may yield different results.Unlike actual performance records,simulated performance returns or scenarios may not necessarily reflect certain market factors such as liquidity constraints,fees and transactions costs.Actual historical or back tes
44、ted past performance does not constitute an indication of future results or performance.This document is only intended to generate discussion regarding particular products and investments and is subject to change or may be discontinued.We are willing to discuss it with you on the understanding that
45、you have sufficient knowledge,experience and professional advice to understand and make your own independent evaluation of the merits and risk of the information and any proposed structures.The information contained herein is not and under no circumstances is to be construed as,a prospectus,an adver
46、tisement,a public offering,an offer to sell securities described herein,or solicitation of an offer to buy securities described herein,in Canada,the U.S.or any other province or territory nor shall it be deemed to provide investment,tax,accounting or other advice.Transactions involving the product(s
47、)described in this document may involve a high degree of risk and the value of such transactions may be highly volatile.Such risks include,without limitation,risk of adverse or unanticipated market developments,risk of counterparty or issuer default,risk of adverse events involving any underlying re
48、ference obligation or entity and risk of illiquidity.In certain transactions,counterparties may lose their entire investment or incur an unlimited loss.The information relating to performance contained in this document is illustrative and no assurance is given that any indicated returns,performance
49、or results will be achieved.Moreover,past performance is not indicative of future results.Information herein is believed reliable but BNPP and its affiliates do not warrant or guarantee its completeness or accuracy.All information,terms and pricing set forth herein reflect our judgment at the date a
50、nd time hereof and are subject to change without notice.In the event that we were to enter into a transaction with you,we will do so as principal(and not as agent or in any other capacity,including,without limitation,as your fiduciary,advisor or otherwise).Only in the event of a potential transactio
