The 3.25-point interest rate cut that the Central Bank of the Republic of Turkey (CBRT) Monetary Policy Committee carried out with meticulous and precise scaling becomes even more meaningful considering the decisions following the European Central Bank (ECB) meeting on the same day. First, we can evaluate the ECB's decisions as a victory for President Mario Draghi, who is preparing to hand over his mandate to International Monetary Fund head Christine Lagarde at the end of October despite opposition from Germany and the Netherlands.
It seems that the U.S.-triggered global trade wars have intensified worries of performance loss and even recession in terms of growth and global trade for the world's leading economies, particularly European Union economies. As a matter of fact, the ECB pulled the growth rate forecast for the end of this year down from 1.2% to 1.1% and for the 2020 forecast from 1.4% to 1.2%. It decreased its inflation forecasts 0.1 points for 2019 and 0.3 points for 2020.
To push U.S. President Donald Trump to the point where he puts even more pressure on the Federal Reserve (Fed), the ECB pulled the deposit interest rate from -0.4% to -0.5%, and from Nov. 1 until it sees fit, it will continue to purchase 20-billion-euro bonds each month. The fact that the pressure on cutting the interest rate cuts and even to immediately halt balance sheet contraction will increase for the Fed Open Market Committee (FOMC), which is due to meet in a week, has fueled discussions.
While the decisions of global central banks to cut interest rates and loosen monetary policies follow one another, as underlined by Treasury and Finance Minister Berat Albayrak, the probability that annualized headline inflation will decline to single digits at the end of September and close 2019 below the target in the New Economic Program both strengthen the possibility that the interest rate, which was reduced to 16.5% after the last meeting of the PPK, could be cut by at least 2 percentage points by the end of the year. Hopefully, banks will also rapidly reflect the meticulously scaled interest rate cut of the CBRT on real sector loan costs.
Blue ocean, red ocean
U.S. Secretary of Commerce Wilbur Ross' visit to Turkey, hosted by Trade Minister Ruhsar Pekcan, is critical in many aspects. First, since the late 1940s, the fact that Turkey-U.S. relations were mainly focused on security perspectives led to critical problems in terms of the health of relations between the two countries. Even though Turkey's ninth president, Turgut Özal, put in a lot of effort to add the trade perspective to relations between the two countries, for the first time, we are making concrete moves toward the $100 billion trade goal with President Recep Tayyip Erdoğan and President Trump.
Ross' meetings with Turkey's export sector representatives and its leading exporting companies last weekend were of critical importance for Turkey's global trading opportunities and capabilities to be seen by its counterparts on the U.S. side. The U.S. is the world's largest market and carries out imports worth $2.5 trillion. When examining the strategies of Chinese and Asian economies that have been more heavily exporting to the U.S. recently, it is seen when trading through a scattered exporter network, importance is given to companies with the ability to deliver large amounts of exports, based on economies of scale, to establish a trade network.
In addition, Asian countries have established large logistics centers to transport their products to different parts of the U.S. more rapidly. This highlights the blue ocean-red ocean issue, an important topic in sales
marketing for some time now. Thousands of companies fiercely compete with each other in national economies and/or world trade. When these companies put forward a marketing-sales strategy to steal customers from each other and fight to stay in the market by continuously breaking prices, an atmosphere arises similar to a red ocean, referring to an ocean where sharks continuously attack each other.
However, to be ambitious, especially in global trade, it is necessary for companies in the same sector, even if they compete, to establish a culture of acting together such that, instead of entering a price breaking race that harms each other, they create synergies to strengthen both economies of scale and added value per kilogram of exports for sales from the same country to the world.
We call this a blue-ocean strategy. Trade negotiations with the U.S. based on the $100 billion market target indicate that our exports will achieve much stronger results in this market with the blue-ocean strategy based on the culture of acting together instead of red-ocean tactics.
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