Turkey in the grip of Fed’s rate hike and rising CDS risk premium: “Capital flight, unsustainable current account deficit, disclosure”
The United States (USA), the Fed (Federal Reserve – US Federal Reserve) continues to increase interest rates against rising inflation. Putting an end to the monetary venting system, the Fed will raise interest rates until more than 2 years of inflation. Combined with the Fed’s interest rates, which will express the course of the dollar supply, and 837 CDS premiums, it makes foreign financing more difficult for Turkey. Evaluating the developments for Medyascope, Assoc. Dr. Fikret Kemal Kizilca, “You can go from Turkey cheaply, you can’t find the car in the open.” said.
With the decision to be announced by the Fed today (June 15), it is expected to increase the policy rate by 75 basis points. The Fed will increase the policy rate applied to interest rate hikes for the first time since 2018 by 25 basis points in 16 2022 countries. 00 store.
Inflation, which was 8.6 percent under the ‘dream effect’ in the USA, seemed the most likely in 41 years. Magnifying the 2.5 percent increase after March 2021 to drive rising inflation, Fed Chairman Jerome Powell said.We need to see inflation clearly and convincinglyHe said that he would continue to increase interest rates. By mid-2023, the Fed’s interest rate is expected to fall below 4 percent, from the current 0.75-1.00 percent.
The dollar supply will shrink, it will be harder to find financing for Turkey
CDS (Credit Default Risk), Turkey’s premium for accessing insurance in dollars against the risk of non-repayment of Eurobond centers is on the agenda with the day to go quickly. The rising trend of a country’s foreign debt money and price reserves has seen the highest drop since 2008 premiums in Turkey. In October 2008, CDS, which briefly rose above 831 basis points, dropped to 500 points again. A CDS premium over 300 points is considered “very good” for international financial resources. The Fed’s rate hike, when Turkey’s CD premium is 837 and struggling to obtain external financing, deepens the risks for Turkey.
In the withdrawn country of Turkey, where the Turkish lira has been over 30 percent in dollar terms since 2022, 72 percent in dollar denominations has been reached, foreign exchange reserves are not negative, and the lack of Central Bank net reserves53, deaths and elections dominate. . The rapidly rising CDS premium reinforces the distrust in the economy. Why tight monetary policy in the USA will be and will become much wider, which is not for countries in the position of Turkey.
Dr. Kızılca: “It can realize the departure of its capital from Turkey”
Ankara University Faculty of Political Sciences (SBF) Department of Economics faculty member Assoc. Fikret Kemal Kızılca, Fed’s policy of increasing interest rates MedyascopeHe evaluated the .
Stating that he is considering the same event on Turkey in the medium and long term, a 50 or 75 basis point increase in interest rates, Kızılca said:When the Fed raises rates, capital flight from Turkey can be predicted, with increased CDS risk premiums. In fact, the Fed’s hikes have been largely priced in the markets. It may be possible to reach for a short time, need to be surehe said.
“Exchange rate may rise to current low levels”
Kızılca, which is thought to have increased the import costs of Turkey even more, as he believes that commodity prices in the world are high and a supply shock is believed to be a medium term “nice days”he explained what the end said and the plan:
“First appearance of the US From the first of 2020, the Fed went to monetary direction. Spent two worlds at a very discounted sale. If the CBRT had accumulated reserves at that time instead of melting reserves, it would now take action. Now, their purchases are very narrow. In this case, it can rise to the level of cars, to the appearance of lowly youths in courtship. This is the meaning of technical abbreviations for domestic expenditures. I predict that the division will be even more severe.”
Babacan: “Immediate measure against bankruptcy”
At the General Assembly Meeting, DEVA Party Chairman Ali Babacan also said:Turkey’s credit rating is down in the worst case in history. 5 CDS showing Turkey’s default, that is, on the situation, reached 836 basis points.” said.
Babacan said that he believes that Greece, which paid in 2008-2009, had 200 basis points. Babacan, who urged to take the power urgently, said that he would tell the future for the future:
“It means the inability of the Republic of Turkey to pay for the oil arising from its content. Bankruptcy means that basic necessities such as gasoline and diesel cannot be found even with money. Bankruptcy encompasses widespread and long-term rebates across the country. Bankruptcy means total economic and monetary collapse. Bankruptcy means chaos.”