Lukashenko says he may quit as president
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Belarusian police introduce colour-coded torture system for detained protesters
Kremlin publicly condemns Belarusian police brutality in hint of growing frustration with Lukashenko
Russian services PMI rises to 48.2, but remains underwater as recovery continues to slow
Russia to start mass vaccinations on December 7
Azerbaijan’s Aliyev calls on Armenia, Russia, Turkey and Iran to assist in creating Nakhchivan land corridor
FPRI BMB Russia: Sberbank releases a three-year transformation strategy to e-commerce concern
Ukraine’s banking sector continues recovery, but profits still lagging last year
Ukraine’s real wages up over 10% in October but have been stagnant in dollar terms for almost a year
FPRI BMB Ukraine: Public has confused opinions on resolving the Donbas conflict
Western Balkans plus Ukraine subsidised coal with over €900mn in 2018-2019
Estonian parcel robot firm Cleveron eyes €30mn state loan
Estonia’s chief auditor says €1bn in state COVID-19 loans issued haphazardly
Economic sentiment in CEE falls in November as recovery momentum splutters
Estonian animation studio Imepilt to hold IPO
Brighter days ahead: The economic bounce back in 2021
Central, Southeast Europe stock markets jump in anticipation of COVID-free future
VISEGRAD BLOG: An easing of trade tensions but still an uncertain situation for export-oriented Central Europe
Hungary's PM risks isolation as Poland mulls dropping EU budget veto
Poland ready to back down from veto of EU budget
Hungary's ruling party in damage control mode after MEP sex scandal bombshell
Poland’s PMI remains stuck just above the improvement line at 50.8 in November
Czech companies dominate this year’s Deloitte Technology Fast 50 CE
Coronacrisis to get worse before it gets better forecasts wiiw
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IMF says downside risks to Albanian economy are increasing
EU ministers fail to agree on launch of accession talks with Albania and North Macedonia
Western Balkans commit to green agenda and regional common market at Sofia summit
Bosnia’s opposition ousts nationalist parties in major cities
Bosnia’s main ethnic parties fight to hold onto power in local elections
Southeast Europe’s EU members to get biggest boost from next budget and recovery funds
Bulgaria imposes 3-week lockdown to slow down COVID-19 spread
CEE politicians highlight trade and security ties as they congratulate Biden
Breakaway Transnistria fully under Sheriff’s control as Obnovlenie party sweeps board in parliament election
Moldova’s presidential election is over, now the battle for the parliament begins
Moldova’s foreign policy reset
Russian establishment quick to congratulate Moldova's new president-elect
Rising COVID-19 cases put intense pressure on CEE healthcare systems
MEPs urge European Commission to act against Hungarian media financing in North Macedonia and Slovenia
North Macedonia mulls decriminalising cannabis to boost tourism
Retail surpass pre-crisis peak as Romanians shop instead of holiday
Romania’s stability election
Romanian venture capital firm Catalyst launches new €40mn-50mn fund for TMT
Serbia to tighten restrictions further as coronavirus cases reach new peaks
Slovenian PM Jansa stands alongside Hungary and Poland in EU rule of law row
BEYOND THE BOSPORUS: Turkish number crunchers deliver November inflation surprise of 14%
Erdogan needs to go says analyst assessing Turkey’s economic collapse
Ukraine strikes deal with Turkey to produce killer drones instrumental in Karabakh conflict
In Karabakh deal, as many questions as answers
Protesters flood Yerevan demanding Armenia’s “traitor” PM quit over Nagorno-Karabakh surrender
Who emerge as the real winners from the bloody Nagorno-Karabakh conflict?
Below average 2020 wine production destined for volatile and uncertain global market
Iran calls on Saudis to limit $67bn defence spending to Tehran’s $10bn
Iranian prosecutors pledge to pursue Trump for Soleimani killing even after he leaves White House
No reaction from Kazakh elites as bombshell FT report says Nazarbayev’s son in law siphoned millions from pipeline scheme
UK court freezes $5bn in assets connected to fugitive Kazakh banker Ablyazov
Attack of the Debt Tsunami: global debt soars to a new all-time high
Kyrgyzstan's proposed new constitution provokes widespread revulsion
Kyrgyzstan's China debt: Between crowdfunding and austerity
CFC joins RWC in assessing KAZ Minerals buyout offer as under-valuation
China business briefing: Not happy with Kyrgyzstan
Mongolian coal exports to China paralysed as Beijing demands virus testing of truck drivers
Mongolia fears economic damage as country faces up to its first local transmissions of coronavirus
Mongolia in lockdown after suffering first local coronavirus transmissions
Mongolia’s wrestling culture: From the grasslands to the cage
No surprises in Tajikistan as Rahmon retains presidency with 91% of vote
A Tajikistan poised on verge of economic calamity set for vote
Tajikistan revives on-off dispute with Iran
Turkmenistan: The dammed united
Turkmenistan: Everybody yurts, sometimes
Dirty money investigation reviews identified payments worth $1.4bn linked to Turkmenistan
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Turkey’s central bank harried the markets on October 22 by confounding big expectations for a rate hike with the announcement that it was keeping its main policy rate (the one-week repo) at 10.25%. Markets had massively bought into a formal rate increase of at least 150bp.
Following the shock, the Turkish lira, which had been testing below the 7.80-per-dollar level, almost burst into 8-per-dollar territory, setting a fresh all-time low of 7.9788.
The banking index on the Borsa Istanbul also took a nosedive as investors, wondering if they had been inserted into some kind of goofy movie, digested Turkey's latest failure to follow orthodox economics.
“Any committed EM sales-trader would have been here at noon for the CBT's rate decision but I'm afraid I was at lunch (the unspeakable in pursuit of the uneatable) and so missed the huge fcuk-up I mean monetary policy error of the CBT failing to hike rates unequivocally and conventionally,” Julian Rimmer of Investec wrote in an emailed note to investors.
“Ultimately, the mkts will force the CBT to make this tightening and because they have delayed it, it will, of course, have to be so much bigger than originally required,” he added.
The central bank has at the back door hiked its cost of funding by more than 500bp since mid-July, but, the tightening on the table that has a direct impact on the real economy has been blown to the wind as—as any fule kno—President Recep Tayyip Erdogan will not allow the national lender to frankly communicate that it is tightening its monetary policy.
That same story has played out for a decade by now. So, there’s really no need to reiterate it each time it repeats. Erdoganomics rule. OK?
“What to do with trading longs initiated Monday? Let's wait until tomorrow and get a clearer picture. We are about 3% out of the money at the moment,” Rimmer also wrote.
The previous rate-setters’ meeting, of course, brought a surprise hike in the policy rate. That September 24 move prompted stakeholders in the Turkish markets to work on building positive sentiment. Their marketing was all about how the palace in Ankara was returning to market-friendly behaviour.
Those who bought in have been rocked back in their shoes. Those looking for the comedy in reality could today have done worse than watch how the market pundits were looping the loop trying to reconcile market analysis with the apparent crazies running the Turkish government.
But anyways, while market players are mightily pissed off with the Turkish central bank and its indigestible interest rate strategy, the regulator did at least hike its late liquidity window rate by 150bp to 14.75%.
The ill-communication between the market and the Erdogan administraton has reached biblical proportions. At the September 24 meeting, Turkey did not actually hike its active funding rate but the market perceived the unexpected 200bp hike in the main policy rate as positive. This time around, the active funding rate has been hiked, but the market has perceived a negative shock.
By the way, let’s not forget that these policy rates are only for the central bank’s funding via open market operations, which actually amounts to less than the total lira funding it provides the banks via USD-TRY swap auctions.
For fans of puzzles, Haluk Burumcekci of Burumcekci Consulting, has calculated, in the chart below shared on October 9 by @e507, the overall funding rate at 10.38%, including USD-TRY swaps with local banks, versus a weighted average cost of funding (WACF) of 11.47% as of October 8.
Since then, the central bank has hiked its ‘FX swap 1w’ and ‘Altin (gold) swap 1w’ rates to 11.75% while the ‘ihale’ (auction) rates gradually reached 11.42% as of October 20 (but that is not the overall average figure, it represents only one auction).
As of October 21, the WACF, which excludes swaps, reached 12.52%.
Reflections from our correspondents on the ground in the Turkish capital.
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