Drain in Foreign Exchange Reserves Stops and Attention Turns to Interest Rate Cut

The rapid decline in foreign exchange reserves, which melted by 13 billion dollars under the impact of the fund crisis, has stopped; with the re-entry of foreign currency in the first three days of last week, a .5 billion dollar increase was registered. Following this development, attention has turned to the Central Bank meeting scheduled for October 22 and a potential interest rate cut.

Recovery Process in Reserves

The melting in foreign exchange reserves, which dropped by 13 billion dollars in the two-week period following the fund crisis, has stopped. Alongside the foreign currency inflow in the first three days of last week, a total reserve increase of 6.5 billion dollars occurred.

Fund Bill and Political Debates

The bill prepared for the liquidation of troubled funds, submitted to the Grand National Assembly of Turkey (TBMM) by the AKP group, is expected to become law. The broad powers granted to the Capital Markets Board (SPK) and the Savings Deposit Insurance Fund (TMSF) have increased concerns that political decisions might be influential during the liquidation process.

Economic Balances and Reserve Figures

Due to the decline in gold prices, a net increase matching the amount of foreign currency entering could not be recorded. According to the Central Bank's latest balance sheet, gross reserves were determined at 174.7 billion dollars, while net reserves excluding swaps stood at 45.3 billion dollars.

Central Bank and Interest Rate Expectations

The recovery of foreign exchange reserves creates room for the Central Bank to make an interest rate cut at the October 22 meeting. Stagnation in domestic demand and contractions in industrial production are increasing pressures toward an interest rate cut.