TRY: Local Stocks Under Pressure Following Inflation Report, Banks Lead Losses

Latest headlines from ECB’s Escriva are broadly consistent with the median Governing Council view (i.e. rates are appropriate at current levels for now, meeting-by-meeting approach with no forward guidance) and his previous comments. 

• He’s previously noted (Sep 16) that “our stance is to remain very agile and well prepared to move in any direction in terms of monetary policy”, so nothing too new in the latest headline around being unable to pre-empt the direction of rates.
• Remarks playing down the appreciation of the Euro as an inflationary risk lean slightly on the hawkish side.
• He notes that US trade disruptions could be inflationary. Full context behind that headline (which in any case with views presented back in March): “Risk on the upside come from fiscal policies, comes from something we have not seen yet but it might materialize maybe with some lags, which is […] the tariffs and trade framework coming from the US. [These could] give rise to a sort of disruption in the supply chain. Sometimes we are focused too much on tariffs but when you examined the agreements -- there are number of nontariff provisions that if they were to materialize in the future might distort trade and this might result in a sort of loss of efficiency at the global level. This is potentially inflationary. This is another factor we need to take into account. By contrast, there are factors that might be to the downside. Diversion of trade from China to Europe [for example]”. 

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