PASHA BANK ENG 20

For the first time since 2008, the FED had interest cut without waiting for the stated monetary policy meeting. In March, the FED decreased the policy rate a total of 150 bps and cut it to 0-0.25% band from 1.50-1.75%. The FED announced that it will buy unlimited bonds alongside cooperating with the other central banks for increasing the global liquidity of the US Dollar through swap and repo line. The US economy had a record low shrinkage of 5% in the first quarter and 31.7% in the second quarter of 2020. The unemployment rate hit a historically record high level of 14.7% in April whereas before the pandemic, it has been at its lowest level since 50 years. The economic activities gathered strength in June owing to normalization steps and the US economy grew 33.1% in the third quarter. In November, the statements concerning the development of vaccines highly effective on the coronavirus had positive impact on the financial markets and the expectations regarding global economic activity. Following the conclusion of the US elections, a new incentive package is expected in the country in 2021. It is forecasted that the FED will continue to keep the interest rate at its current level and opt for more budget spending to enable a strong recovery. The European Central Bank (ECB) did not make any changes in the monetary policy in 2020 and kept the policy interest rate at 0% and deposit rate at -0.50%. The ECB initiated a repo option providing security backed euro liquidity to central banks located outside the Euro Area. The Euro Area economy continued to shrink on the annual basis even though it grew rapidly by 12.5% in the third quarter following the shrinkage of 3.7% in the first and 11.7% in the second quarter. The Euro Area economic weakness due to the pandemic impact was observed clearly especially in the demand indicators. The increase in the annual Consumer Price Index which indicated a deflation since August, was -0.3% in November, proving the mentioned situation continued. Uncertainty prevails as new lockdown measures are taken due to the increase in the spread rate of the pandemic. On the other hand, with the assumption that the EC countries will get hold of the vaccine sooner than the rest of the world, recovery was observed especially in the trust indicators as of December. It is expected that the ECB will not change the interest rates and will continue the asset purchase program also in 2021. 1 st quarter 2 nd quarter 3 rd quarter + 4.4 % - 9.9 % + 6.7 % Turkish economy growth rates for 2020 Annual Report 2020 PASHA Bank General Information 19