Download Recent Developments in Monetary Policy, Inflation and External Balance Mehmet Yorukoglu

Recent Developments in
Monetary Policy, Inflation and
External Balance
Mehmet Yorukoglu
Deputy Governor
April 2012
Contents
I.
The New Policy Framework
II.
Rebalancing
III.
Growth
IV.
Inflation
2
THE NEW POLICY FRAMEWORK
3
Multiple Instruments, Multiple Objectives
KEY INDICATORS
INSTRUMENTS
Reserve
Requirements
Macroprudential
Tools
Interest Rate
Corridor
Funding
Strategy
Credit
Policy
Expectations
Weekly
Repo
OBJECTIVES
Interest
Rate
Policy
Credit
Growth
Exchange
Rate
Liquidity
Policy
Price
Stability
Financial
Stability
4
Liquidity Policy
Source: CBRT.
CBRT Policy Rates
The Average Cost of CBRT Funding
(Percent)
(Percent)
Latest Observation: April 20 , 2012.
Source: CBRT.
Latest Observation: April 20, 2012
5
Credit Policy
Reserve Requirements
Source: CBRT.
Latest Observation: April 05, 2012
6
REBALANCING
7
Credit Growth and External Deficit
Credit Growth and Current Account Deficit
(Percent, 12 month cumulative)
12
16
Δ in Credit Stock / GDP (right axis)
10
14
12
8
10
6
8
6
4
Current Account Deficit / GDP
4
2
2
0
0
Source: CBRT.
8
Credit Growth
Total Loan Growth Rates
(13 Weeks Moving Average, Annualized, FX Adjusted, Percent)
60
2012
2007-2011 average
2011
50
40
30
20
10
0
Source: CBRT.
Latest Observations: March 18, 2012
9
Rebalancing
Real Exports and Imports
(2003=100, Seasonally Adjusted)
200
Imports
180
160
Exports
140
120
100
1
2
3
4
2005
1
2
3
2006
4
1
2
3
2007
4
1
2
3
2008
4
1
2
3
2009
4
1
2
3
2010
4
1
2
3
4
2011
Source: TURKSTAT, CBRT.
10
Rebalancing
Final Domestic Demand and Exports
(2008Q1=100)
Source: CBRT.
*2012Q1 is forecast.
11
Exchange Rate
01.11.2010 – 22.08.2011
23.08.2011 – 11.04.2012
Source: Bloomberg, CBRT.
Note: Positive change means depreciation against US dollar.
12
Real Exchange Rates
CPI Based REER*
(Base year: 2003)
QE2
Source: CBRT.
Policy
Reaction
*Reel effective exchange rate, Natural logarithms.
13
Real Exchange Rates
CPI Based (Developed Economies) REER*
(Base year: 2003)
Source: CBRT.
QE2
Policy
Reaction
*Natural logarithms.
14
Real Exchange Rates
CPI Based (Developing Economies) REER*
(Base year: 2003)
QE2
Source: CBRT.
Policy
Reaction
*Natural logarithms.
15
Exchange Rate Volatility
Volatility in Emerging Market Currencies
(Percent, Implied for the next 12 months)
Source: Bloomberg, CBRT.
*Emerging market currencies include Brazil, Chile, Czech Republic, Hungary, Mexico, Poland,
South Africa, Indonesia, South Korea and Colombia.
Latest Observations: April 16,2012
16
Quality of Capital Inflows
Main Sources of Current Account Deficit Finance
(12-months Cumulative, Billion USD)
Source: CBRT.
*Short-term capital movements are sum of banking and real sectors' short term net credit and deposits in banks.
**Long-term capital movements are sum of banking and real sectors’ long term net credit and bonds issued by banks and the Treasury.
17
GROWTH
18
Gross Domestic Product
Actual GDP
(Base Quarter: 2008Q1, Seasonally Adjusted, Natural Logarithms)
Source: CBRT.
*2012Q1 is forecast.
19
Soft Landing
Industrial Production and PMI in Turkey
(2005=100, Seasonally Adjusted, Monthly)
135
60
127,53
130
55
125
120
50
49.6
115
45
110
105
40
100
IP
PMI (right axis)
35
95
90
30
Source: MARKIT, TURKSTAT.
Latest Observations: March 2012 for PMI, February 2012 for IP.
20
Capital and Labor
Fixed Capital Formation*
Labor Market Participation Rate*
(Percent, Ratio to GDP with current prices)
(Percent, Seasonally Adjusted)
Source: TURKSTAT, CBRT.
*Annualized.
Source: TURKSTAT, CBRT.
21
Employment
Annual Average Employment Growth*
(2007-2010)
Source: WEO, Turkstat, CBRT.
*Difference of natural logarithms.
22
Unit Labor Cost
Unit Labor Cost (Hourly wage payments/ productivity)
(Real*, Seasonally Adjusted, 2008=100)
Employment
Prospects and Employment
(Percent, 3 month moving averages)
Source: CBRT
24
INFLATION
25
Inflation
Inflation in Turkey vs. Emerging Markets
(Percent, Weighted Average)
30
25
20
15
Turkey
10
5
Emerging Markets
0
Source: CBRT and Bloomberg.
Emerging Market Economies: China, Brazil, India, Mexico , Russia, Turkey, Poland, Indonesia, S. Africa, Argentina, Thailand, Malaysia, Czech Rep., Colombia, Hungary,
Romania, Ukraine, Vietnam, Chili, Peru, Egypt, Morocco, Lebanon and S. Arabia.
*2012 and 2013 end year values are from Consensus Forecast.
26
Inflation Expectations
Medium Term Inflation Expectations
Source: CBRT.
* CBRT Survey of Expectations.
27
Inflation Forecasts and Realizations
Source: CBRT.
* Shaded region indicates the 70 percent confidence interval for the forecast.
28
Summary
•
•
•
•
•
•
Rebalancing between the domestic and external demand continues
as envisaged.
The highest level in current account deficit was seen in October
2011. The improvement will continue in the coming months.
Growth will remain moderate throughout 2012.
Inflation will peak in this month and it will fall significantly in May.
The fall will resume and accelerate in the last months of the year.
The Central Bank strictly prefers revising its policy stance to
revising its inflation forecast.
All policy actions will remain geared to attain the 5% inflation
target by mid-2013.
29
Recent Developments in
Monetary Policy, Inflation and
External Balance
Mehmet Yorukoglu
Deputy Governor
April 2012