External Impact of US Monetary Policy on Emerging Markets
Central Banking Seminar, The Implications of Divergent Monetary Policies
Federal Reserve Bank of New York
October 07, 2015
Heightened Uncertainties
The global economy and financial markets currently face heightened uncertainties:
1) growth prospects of different regions and economies
2) impact of the prospective normalization of
global monetary policies
3) volatile commodity prices
2
3
Source: Bloomberg, CBRT Calculations (*) Emerging markets : Brazil, India, South Africa, Indonesia, Mexico, Poland, Hungary and Turkey Bloomberg Capital Inflow Index: 0.1*SPGSCI Index+0.3* MSCIEM Index+0.3*EMBI Index+0.3*FX CarryTrade Index
Capital Flow Proxy
Portfolio Outflows from Emerging Markets
Last Observation: September 29, 2015.
100
110
120
130
140
150
160
170
180
190
200
01
/10
04
/10
08
/10
12
/10
03
/11
07
/11
10
/11
02
/12
06
/12
09
/12
01
/13
05
/13
08
/13
12
/13
03
/14
07
/14
11
/14
02
/15
06
/15
09
/15
EM Capital Flows Index
4
Source: CBRT
Change in Nonresidents Bond and Equity Holdings (US$ million)
Turkey has mainly experienced bond outflows.
Last Observation: September 2015.
-15000
-10000
-5000
0
5000
10000
15000
20000
25000
30000
01
/11
04
/11
07
/11
10
/11
01
/12
04
/12
07
/12
10
/12
01
/13
04
/13
07
/13
10
/13
01
/14
04
/14
07
/14
10
/14
01
/15
04
/15
07
/15
Nonresidents Equity Holdings in TRY, 52W Chg
Nonresidents Bond Holdings in TRY, 52W Chg
5
Source: Bloomberg
Emerging Economies: Turkey, South Africa, Brazil, Indonesia, Mexico, Colombia,, Poland, Czech Republic, Romania
Currency Volatility (3M Implied Volatility)
Volatility of EM currencies has recently increased.
Last Observation: September 29, 2015.
0
5
10
15
20
25
30
01
/11
04
/11
07
/11
10
/11
01
/12
04
/12
07
/12
10
/12
01
/13
04
/13
07
/13
10
/13
01
/14
04
/14
07
/14
10
/14
01
/15
04
/15
07
/15
Emerging Markets
Turkey
6
Source: Bloomberg.
(*) Emerging markets : Brazil, India, South Africa, Indonesia, Chile, Colombia, Mexico, Poland, Czech Republic, Romania and Turkey
EM 10 Year Bond Yields (3M Rolling Average of Absolute Daily Changes)
EM sovereign and local currency bond yields have been relatively stable.
Last Observation: September 29, 2015.
0
2
4
6
8
10
06
/10
11
/10
04
/11
09
/11
03
/12
08
/12
01
/13
06
/13
12
/13
05
/14
10
/14
03
/15
09
/15
bps
Hard Currency Bond Local Currency Bond
7
Source: Bloomberg
Inflation Rates in EMEs
Inflation rates in EMEs have been diverging.
Last Observation: September 2015.
-5
0
5
10
15
20
01
/10
05
/10
09
/10
01
/11
05
/11
09
/11
01
/12
05
/12
09
/12
01
/13
05
/13
09
/13
01
/14
05
/14
09
/14
01
/15
05
/15
09
/15
Indonesia Hungary Russia South Africa Turkey Brazil Mexico
8
Source: Bloomberg
Real Policy (Effective) Rates in EMEs
Real policy rates in EMEs have been diverging.
Last Observation: August 2015.
-6
-4
-2
0
2
4
6
8
01
/12
04
/12
07
/12
10
/12
01
/13
04
/13
07
/13
10
/13
01
/14
04
/14
07
/14
10
/14
01
/15
04
/15
07
/15
%
Brazil Turkey Indonesia South Africa
Mexico Russia Hungary
9
Fundamentals and Policies Required During the Normalization of Global Monetary Policies
Sound growth outlook
Stable inflation outlook
Repairing imbalances
Adequate external safety net
Policy buffers
A rich set of policy tools
10
Fundamentals and Policies Required During the Normalization of Global Monetary Policies
Sound growth outlook
Stable inflation outlook
Repairing imbalances
Adequate external safety net
Policy buffers
A rich set of policy tools
11
Source: TURKSTAT
Contribution to Annual GDP Growth (Percentage Points)
GDP continues to grow at a moderate pace.
Last Observation: 2015 Q2
-10
-5
0
5
10
15
20
03
/10
06
/10
09
/10
12
/10
03
/11
06
/11
09
/11
12
/11
03
/12
06
/12
09
/12
12
/12
03
/13
06
/13
09
/13
12
/13
03
/14
06
/14
09
/14
12
/14
03
/15
06
/15
Change in Inventories
Net Exports
Final Domestic Demand
GDP
Consumer confidence indicators point to a deceleration in the private consumption for the second half.
12
Consumer Confidence
Investment and Employment Prospects
(Seasonally Adjusted)
50
55
60
65
70
75
80
85
90
50
60
70
80
90
100
110
01
/12
05
/12
09
/12
01
/13
05
/13
09
/13
01
/14
05
/14
09
/14
01
/15
05
/15
09
/15
Bloomberg HT TURKSTAT-CBRT (rhs)
0
5
10
15
20
25
01
/12
04
/12
07
/12
10
/12
01
/13
04
/13
07
/13
10
/13
01
/14
04
/14
07
/14
10
/14
01
/15
04
/15
07
/15
Investment Tendency Employment Tendency
Source: Bloomberg HT, TURKSTAT, CBRT.
Last Observation: September 2015 for CNBC-e Survey,
September 2015 for TURKSTAT-CBRT Survey. Source: CBRT Business Tendency Survey Last Observation: September 2015.
The recovery in export orders is expected to limit the slowdown in the economic activity.
13
Industrial Production and Capacity Utilization
(Seasonally Adjusted)
Export Orders
(Seasonally Adjusted)
Source: TURKSTAT, CBRT.
Last Observation: July 2015 for Industrial Production,
September 2015 for Capacity Utilization. Source: CBRT Business Tendency Survey.
Last Observation: September 2015.
70
71
72
73
74
75
76
77
78
105
110
115
120
125
130
01
/12
04
/12
07
/12
10
/12
01
/13
04
/13
07
/13
10
/13
01
/14
04
/14
07
/14
10
/14
01
/15
04
/15
07
/15
Industrial Production
Capacity Utilization (rhs)
-10
-5
0
5
10
15
20
01
/14
03
/14
05
/14
07
/14
09
/14
11
/14
01
/15
03
/15
05
/15
07
/15
09
/15
Employment continued to increase at a steady pace during the first half of the year; though some deceleration is expected in the second half.
14
LFPR and Employment Rate
Unemployment Rates
Source: TURKSTAT, Household Labor Force Survey, CBRT.
Last Observation: June 2015. Source: TURKSTAT, Household Labor Force Survey, CBRT.
Last Observation: June 2015.
19
20
21
22
23
24
25
26
27
28
42
44
46
48
50
52
05
/10
09
/10
01
/11
05
/11
09
/11
01
/12
05
/12
09
/12
01
/13
05
/13
09
/13
01
/14
05
/14
09
/14
01
/15
05
/15
Tho
usa
nd
s Participation Rate (%)
Employment (millions, right axis)
7
9
11
13
15
05
/10
09
/10
01
/11
05
/11
09
/11
01
/12
05
/12
09
/12
01
/13
05
/13
09
/13
01
/14
05
/14
09
/14
01
/15
05
/15
Unemployment Rate (percent)
Non-farm Unemployment Rate (percent)
15
Fundamentals and Policies Required During the Normalization of Global Monetary Policies
Sound growth outlook
Stable inflation outlook
Repairing imbalances
Adequate external safety net
Policy buffers
A rich set of policy tools
16
Source: TURKSTAT.
3
4
5
6
7
8
9
10
11
12
13
08
/11
10
/11
12
/11
02
/12
04
/12
06
/12
08
/12
10
/12
12
/12
02
/13
04
/13
06
/13
08
/13
10
/13
12
/13
02
/14
04
/14
06
/14
08
/14
10
/14
12
/14
02
/15
04
/15
06
/15
08
/15
CPI H I
Inflation Indicators
(Annual Percentage Change)
Energy price developments support disinflation, while exchange rate movements delay the improvement in the core indicators.
Last Observation: September 2015.
17
Source: TURKSTAT, CBRT.
Import Price Index
(2010=100)
The decline in import prices partly offsets the pass-through effect from exchange rates.
Last Observation: July 2015.
60
80
100
120
140
160
180
200
220
240
260
01/1
0
05/1
0
09/1
0
01/1
1
05/1
1
09/1
1
01/1
2
05/1
2
09/1
2
01/1
3
05/1
3
09/1
3
01/1
4
05/1
4
09/1
4
01/1
5
05/1
5
Import Prices (TL)
Import Prices (USD)
18
Source: TURKSTAT, CBRT.
Import Price Index
(2010=100)
The decline in import prices partly offsets the pass-through effect from exchange rates.
Last Observation: September2015.
*The values for September and August are forecasts
60
80
100
120
140
160
180
01/1
0
05/1
0
09/1
0
01/1
1
05/1
1
09/1
1
01/1
2
05/1
2
09/1
2
01/1
3
05/1
3
09/1
3
01/1
4
05/1
4
09/1
4
01/1
5
05/1
5
09/1
5
Import Prices (TL)
Import Prices (USD)
19
Source: CBRT.
Inflation expectations have edged up recently due to the impact of the uncertainty in domestic and global markets.
Last Observation: September 2015.
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
08
/11
10
/11
12
/11
02
/12
04
/12
06
/12
08
/12
10
/12
12
/12
02
/13
04
/13
06
/13
08
/13
10
/13
12
/13
02
/14
04
/14
06
/14
08
/14
10
/14
12
/14
02
/15
04
/15
06
/15
08
/15
12 months
24 months
Inflation Expectations
(Percent)
20
Fundamentals and Policies Required During the Normalization of Global Monetary Policies
Sound growth outlook
Stable inflation outlook
Repairing imbalances
Adequate external safety net
Policy buffers
A rich set of policy tools
21
Source: TURKSTAT.
Exports to European Union
(12 months cumulative, billion Euros)
The recovery in European economies will support growth and rebalancing in upcoming quarters.
Last Observation: August 2015.
30
35
40
45
50
55
60
01
/07
07
/07
01
/08
07
/08
01
/09
07
/09
01
/10
07
/10
01
/11
07
/11
01
/12
07
/12
01
/13
07
/13
01
/14
07
/14
01
/15
07
/15
22
Source: TURKSTAT
Energy Imports
(12-Month Cumulative, Billion USD)
The favorable impact of lower oil prices on the current account balance will be more pronounced in the forthcoming period.
Last Observation: August 2015.
25
30
35
40
45
50
55
60
65
01
/10
04
/10
07
/10
10
/10
01
/11
04
/11
07
/11
10
/11
01
/12
04
/12
07
/12
10
/12
01
/13
04
/13
07
/13
10
/13
01
/14
04
/14
07
/14
10
/14
01
/15
04
/15
07
/15
23
Source: CBRT.
Real Effective Exchange Rate
(CPI Based, 2003=100)
Real Effective Exchange Rates have reached historically low levels.
Last Observation: August 2015.
80
90
100
110
120
130
140
02/
03
08/
03
02/
04
08/
04
02/
05
08/
05
02/
06
08/
06
02/
07
08/
07
02/
08
08/
08
02/
09
08/
09
02/
10
08/
10
02/
11
08/
11
02/
12
08/
12
02/
13
08/
13
02/
14
08/
14
02/
15
08/
15
24
Source: CBRT.
Current Account Balance (CAB)
(12-Month Cumulative, Billion USD)
The improvement in the current account deficit will resume with the August figure and is expected to continue throughout 2015.
Last Observation: July 2015.
-80
-75
-70
-65
-60
-55
-50
-45
-40
-35
-30
10
/10
12
/10
02
/11
04
/11
06
/11
08
/11
10
/11
12
/11
02
/12
04
/12
06
/12
08
/12
10
/12
12
/12
02
/13
04
/13
06
/13
08
/13
10
/13
12
/13
02
/14
04
/14
06
/14
08
/14
10
/14
12
/14
02
/15
04
/15
06
/15
CAD CAD (Excluding gold)
25
Source: CBRT.
Current Account Deficit (CAD) Financing
(12-Months Cumulative, Billion USD)
As of July 2015, current account deficit is almost entirely financed through long term borrowing and FDI flows.
*Long term inflows are sum of banking and real sectors’ long term net credit and bonds issued by banks and the Treasury. Short term capital movements are sum of banking and real
sectors' short term net credit and deposits in banks.
Last Observation: July 2015.
-5
5
15
25
35
45
55
65
75
85
10
/10
12
/10
02
/11
04
/11
06
/11
08
/11
10
/11
12
/11
02
/12
04
/12
06
/12
08
/12
10
/12
12
/12
02
/13
04
/13
06
/13
08
/13
10
/13
12
/13
02
/14
04
/14
06
/14
08
/14
10
/14
12
/14
02
/15
04
/15
06
/15
Portfolio and Short Term** FDI and Long Term* CAD
26
Source: CBRT, External Debt Statistics of Non-Financial Corporate Sector
Maturity Structure of External Liabilities of the Corporate Sector
(Percent Share)
Half of the corporate foreign currency debt has more than three-year maturity.
22
.0
13
.2
17
.5
18
.7
28
.5
18
.1
16
.6
15
.5
20
.7
29
.2
17
.3
17
.2
14
.8
21
.8
28
.6
17
.7
15
.5
14
.2
19
.3
33
.4
0-1 Year 1-2 Years 2-3 Years 3-5 Years 5 Years +
03.14 09.14 03.15 06.15
27
Source: CBRT.
Total Loan Growth Rate
(Year on Year Change, Percent)
Loan growth has retreated to a reasonable pace due to the tight monetary policy stance and macroprudential measures.
Last Observation: September 23, 2015.
Total loan is inclusive of all types of banks (deposit banks, participation banks, and development/investment banks) and credit cards.
Adjusted for exchange rate.
10
15
20
25
30
35
40
01
/11
03
/11
05
/11
07
/11
09
/11
11
/11
01
/12
03
/12
05
/12
07
/12
09
/12
11
/12
01
/13
03
/13
05
/13
07
/13
09
/13
11
/13
01
/14
03
/14
05
/14
07
/14
09
/14
11
/14
01
/15
03
/15
05
/15
07
/15
09
/15
70
80
90
100
110
120
130
70
80
90
100
110
120
130
01
/10
04
/10
07
/10
10
/10
01
/11
04
/11
07
/11
10
/11
01
/12
04
/12
07
/12
10
/12
01
/13
04
/13
07
/13
10
/13
01
/14
04
/14
07
/14
10
/14
01
/15
04
/15
07
/15
Announcement of Required
Reserves Measure in Financial
Stability Report
28
Measures to Support Financial Stability: Supporting Turkish Lira Core Liabilities
The remuneration rate of Turkish lira required reserves may be revised to reduce the intermediation cost of banking sector and to support core liabilities.
Credit/Deposit Ratio
(Percent)
Source: BRSA Last Observation: September 11, 2015.
29
Source: CBRT Financial Stability Report, No:20
NPL Ratios For Corporate Loans
(Percent)
NPL ratios for FX corporate loans have been declining.
Last Observation: June 2015.
2.1
3.1
0.9
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
03
/13
05
/13
07
/13
09
/13
11
/13
01
/14
03
/14
05
/14
07
/14
09
/14
11
/14
01
/15
03
/15
05
/15
Total Corporate TL FX
30
Fundamentals and Policies Required During the Normalization of Global Monetary Policies
Sound growth outlook
Stable inflation outlook
Repairing imbalances
Adequate external safety net
Policy buffers
A rich set of policy tools
31
Reserve Requirement Policies
FX liquidity will be released via reserve requirement policies (before and during normalization).
CBRT Reserves
(Billion USD )
Source: CBRT Last Observation: September 11, 2015.
0
20
40
60
80
100
120
140
09
/11
11
/11
01
/12
03
/12
05
/12
07
/12
09
/12
11
/12
01
/13
03
/13
05
/13
06
/13
08
/13
10
/13
12
/13
02
/14
04
/14
06
/14
08
/14
10
/14
12
/14
01
/15
03
/15
05
/15
07
/15
FX for FX RR CBRT Other FX Reserve ROM FX CBRT Other Gold Reserves Gold for Precious Metal ROM Gold
32
Measures to Support Financial Stability: Lengthening the Maturity of Noncore FX Liabilities
FX required reserve ratios for the newly originated FX noncore liabilities of the financial institutions are adjusted to encourage further maturity extension.
0
10
20
30
40
50
60
01
/14
02
/14
03
/14
04
/14
05
/14
06
/14
07
/14
08
/14
09
/14
10
/14
11
/14
12
/14
01
/15
02
/15
03
/15
04
/15
05
/15
06
/15
07
/15
08
/15
Up to 1-Year
Longer than 3-Years
Required Reserve Measures
Up to 3-Years
Maturity Breakdown of Non-Core FX Liabilities (Percent)
Source: CBRT Last Observation: August 28, 2015.
33
FX Liquidity Measures: Foreign Exchange Deposit Market
The CBRT has expanded the safety net facility by increasing the transaction limits
at the CBRT Foreign Exchange and Banknotes Markets.
FX liquidity readily available to the financial system through ROM and foreign exchange deposit market is now considerably above the short term debt stock of the banks.
(Billion USD )
0
10
20
30
40
50
60
01/1
2
04/1
2
08/1
2
12/1
2
04/1
3
08/1
3
12/1
3
04/1
4
08/1
4
12/1
4
04/1
5
08/1
5
Short-Term FX Borrowing Facility from the CBRT
FX and Gold Held at the CBRT Accounts via the ROM Facility
60
65
70
75
80
85
90
95
100
20
30
40
50
60
70
80
90
100
01/1
2
05/1
2
09/1
2
01/1
3
05/1
3
09/1
3
01/1
4
05/1
4
09/1
4
12/1
4
04/1
5
08/1
5
ROM FX and Gold Reserves+Short-Term FX Borrowing Facility
Short Term FX External Debt of the Banking System (RHA)
Source: CBRT Last Observation: August 28, 2015. Last Observation: September 11, 2015. Source: CBRT
(Billion USD )
34
Fundamentals and Policies Required During the Normalization of Global Monetary Policies
Sound growth outlook
Stable inflation outlook
Repairing imbalances
Adequate external safety net
Policy buffers
A rich set of policy tools
Policy Buffers
Ample fiscal policy space:
• very low budget deficit, as well as primary surplus
• low public debt to GDP ratio
Ample monetary policy space
Ample macroprudential policy space
35
36
Fundamentals and Policies Required During the Normalization of Global Monetary Policies
Sound growth outlook
Stable inflation outlook
Repairing imbalances
Adequate external safety net
Policy buffers
A rich set of policy tools
The Road Map During the Normalization of Global Monetary Policies
37
Liquidity Management Simplification
•More narrow, more symmetric interest rate corridor
•Restriction on funding to primary dealers •More simplified collateral conditions
FX Liquidity Measures
•Flexible FX selling auctions •Adjustments in required reserve and Reserve
Options Mechanism conditions •Measures on FX deposit market
Measures to Support Financial
Stability •Lengthening the maturity of noncore FX
liabilities •Supporting core liabilities in Turkish Lira •Remuneration of FX required reserves
The Road Map During the Normalization of Global Monetary Policies
38
Policy Measure Timing
Interest Rate Corridor During Normalization
Funding Before Normalization
Collateral Conditions Before and During Normalization
Flexible FX Selling Auctions Before Normalization
Reserve Options Before and During Normalization
Measures on FX Deposit Market Before Normalization
Lengthening the Maturity of Noncore FX Liabilities Before Normalization
Supporting TL Core Liabilities Before and During Normalization
Remuneration of FX Required Reserves Before and During Normalization
39
Source: CBRT
Interest Rates
(Percent)
The liquidity policy has been tight and will remain tight as long as deemed necessary.
Last Observation: October 02, 2015.
3
4
5
6
7
8
9
10
11
12
13
3
4
5
6
7
8
9
10
11
12
13
05
/13
06
/13
07
/13
08
/13
09
/13
10
/13
11
/13
12
/13
01
/14
02
/14
03
/14
04
/14
05
/14
06
/14
07
/14
08
/14
09
/14
10
/14
11
/14
12
/14
01
/15
02
/15
03
/15
04
/15
05
/15
06
/15
07
/15
08
/15
09
/15
10
/15
Interest Rate Corridor CBRT Average Fund Rate
BIST Interbank Market O/N Rates One-Week Repo Rate
40
Source: CBRT.
-2
0
2
4
6
8
10
12
-2
0
2
4
6
8
10
12
04
/11
06
/11
08
/11
10
/11
12
/11
02
/12
04
/12
06
/12
08
/12
10
/12
12
/12
02
/13
04
/13
06
/13
08
/13
10
/13
12
/13
02
/14
04
/14
06
/14
08
/14
10
/14
12
/14
02
/15
04
/15
06
/15
08
/15
5-Year Market Rate 3-Month Market Rate
5 year-3 month spread
Interest Rates
(Percent)
Last Observation: October 02, 2015.
Yield curve is flat due to the tight liquidity policy.
41
Source: CBRT.
Loan Growth Rates (Annual Percentage Change)
Commercial loans grow at a faster pace than consumer loans, contributing to price stability, financial stability, and the rebalancing process.
Last Observation: September 23, 2015.
Inclusive of loans extended by all types of banks (deposit banks,
Participation banks, and development/investment banks). FX adjusted.
Commercial
Consumer
0
5
10
15
20
25
30
35
40
45
50
0
5
10
15
20
25
30
35
40
45
50
01
/10
04
/10
07
/10
10
/10
01
/11
04
/11
07
/11
10
/11
01
/12
04
/12
07
/12
10
/12
01
/13
04
/13
07
/13
10
/13
01
/14
04
/14
07
/14
10
/14
01
/15
04
/15
07
/15
42
FX Liquidity Measures: Flexible FX Sale Auctions
Flexibility of FX sale auctions is increased to contain exchange rate volatility.
FX Sale Auctions
(Million USD )
Source: CBRT Last Observation: September 30, 2015.
0
200
400
600
800
1000
1200
0
20
40
60
80
100
120
06
/14
07
/14
08
/14
09
/14
10
/14
11
/14
12
/14
01
/15
02
/15
03
/15
04
/15
05
/15
06
/15
07
/15
08
/15
09
/15
Monthly Quantity Sales of FX Sales (Right Axis)
Daily FX Sales
Central Banking Seminar, The Implications of Divergent Monetary Policies
Federal Reserve Bank of New York
October 07, 2015
Thank you!