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“Even if external factors disappear, 60 points remain in inflation”

“Even if external factors disappear, 60 points remain in inflation”
“Even if external factors disappear, 60 points remain in inflation”

Prof. dr. In his comments on the CBRT’s interest rate decision, Hakan Kara said, “There is no interest rate outlook based on economic fundamentals. As far as I understand, there is a desire to go to a psychological level there. My guess is that interest rates can go to single digits before the election. When we look at how much the interest rate cut is beneficial for economic activity, we see that it is not very beneficial; because loan rates are controlled, deposit rates are controlled. The link between the Central Bank interest rates and market rates is not very strong either. In such an environment, whether the Central Bank interest rates were 13, 12 or 9, it doesn’t matter much. According to my calculations; 20 points of 80 percent inflation is due to foreign prices. Even if global peace comes, even if external factors disappear, 20 points of inflation will go away and 60 points will remain. These prices will be tried to be kept in the coming period,” he said.

“The risk of stagflation appears to have increased in the short term”

“Global central banks are making a decisive tightening,” he said in a Bloomberg HT broadcast. The downward trend in inflation seems to have started. Supply chain and some other supply-side issues began to unravel; but due to the war, energy and agricultural commodities still continue to pose risks. It seems that there will be some solidification in inflation in the world, especially in the service sector. This may require central banks to stay tight for a long time,” he said.

Emphasizing that the characteristic feature of the current monetary tightening is that it has been synchronized in a way that has never been seen in the last 40 years, Kara said, “With the exception of a few central banks, there is a monetary tightening without exception. In addition, there is a simultaneous tightening not only in monetary policy but also in fiscal policy. It seems that the risk of stagflation in the short term and the probability of entering a long-lasting recession in the medium term have increased.

Expressing that such a global conjuncture is not in favor of Turkey, Kara said, “When we look at foreign demand, the weakening in the European economy has already begun to affect our exports. Commodity prices started to move down; but energy and agricultural commodities are still at high levels due to the war. On top of that, as the monetary policy we implement weakens the lira, import inflation pressure becomes unavoidable. “A strong dollar, high global interest rates increase the cost of borrowing,” he said.

“Our ability to overcome this process has increased”

On the other hand, despite the fact that Turkey has a financing need, the need for financing has decreased due to the increase in foreign exchange reserves and the increase in net errors and omissions in recent months, Kara said: It is useful to say that our ability has increased, “he said.

Kara continued:

We do not know where the exact error and omission originated. In the last 7 months, we see that net errors and omissions have increased faster than in history. I expect entries from net errors and omissions to continue for a while. But this is not a sustainable situation. It will be difficult to keep the exchange rate stable in a period that needs foreign exchange.

The article is in Turkish

Tags: external factors disappear points remain inflation

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