Tarman: Still on a knife edge for foreign inflows


Ozan Tarman, Vice President of Deutsche Bank London, stated that Turkey could take the base effect wind behind it in inflation in the fall, “The situation is still on a knife edge for the foreign inflow we have been waiting for 7-8 years,” he said.

As a guest of Bloomberg HT, Deutsche Bank London Vice President Ozan Tarman made evaluations on the monetary policy of the US Federal Reserve (Fed), the European Central Bank (ECB) and the Central Bank of the Republic of Turkey (CBRT). Tarman also shared his inflation forecasts and the inflow of foreign funds to Turkey.

Touching on the Fed’s interest rate decision and the bank’s fight against inflation, Tarman said that those who thought that supply was the source of the problem in the fight against inflation for 1.5-2 years started to be right. Stating that first the pandemic and then the Ukraine war had a huge impact on inflation, Tarman said, “Now the hand of those on the supply side has become much stronger. It is very likely that both Powell and Lagarde will cut interest rates. As soon as this is done, the inflow to local papers in emerging markets will continue.”

Tarman made the following statements in his predictions about the Fed and ECB’s interest rate decision:

“The dollar is a little more mixed. The wind started blowing again in favor of the dollar. As of now, the markets think that the ECB will cut interest rates earlier. Almost 90-92 percent pushes Lagarde to cut interest rates in April. Fed expectations for March are lower. When the US cuts interest rates, money inflows to emerging markets will continue. Due to the earthquake, the expectation that the Bank of Japan will normalize interest rates has been postponed a bit. Maybe April, maybe May…These also helped the dollar.”

“We need to go slow in opening swap lines”

Explaining what kind of a year he expects in terms of fund flows, Tarman also shared his year-end inflation forecasts for Turkey. Tarman stated that for the first time in 5-6 years, real foreign interest was seen starting from November last year, and that there was a credibility given to both Treasury and Finance Minister Mehmet Şimşek and CBRT Governor Hafize Gaye Erkan. Tarman continued his words as follows:

“But investors want to see that this is permanent. What is more important for our country is permanent investment and FTA. For these to happen, much more stability is required. We are seeing the biggest interest in 5-6 years. As of the fall, we will get the base effect wind behind us. Our official forecast is for end-2024 inflation to fall to 45 percent, slightly higher than the central bank’s forecast. Funds’ interest in Turkey, including FX risk, is at a 5-year high. When the Fed cuts interest rates, the race to enter emerging markets begins. The situation is still on a knife edge for the foreign inflow we have been waiting for 7-8 years. We need to go slowly in opening swap lines, there is no need to rush.”

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