The decision taken by the CBRT yesterday reminded me of an answer to criticism that was directed at the economy administration: “It could have been worse if we didn’t do it…”
As all statements are deemed to be true until they are proven wrong, we are left with no other choice but to say, “There’s nothing to do”. I have a few things to say to those claiming the reason why exchange rates remained stable is nothing but the international conjuncture: When making decisions, Central Banks always take into consideration domestic conditions as well as international conditions.
Central Bank has made a bad move for the first time in a long time. Why? Only to prove that it is an independent institution. It wanted to prove its adequacy against the political pressure. However, Central Bank of the Republic of is a well-established institution. Therefore, it has the necessary reflexes to help it make the right decisions without being prejudiced by somebody else.
This time, however, it made a useless decision just to prove that their decision-making has been under no one’s influence, and then acted in a “It could have been worse. You should be grateful” manner, using the improvement in the US bond market and Dollar’s worldwide appreciation as an excuse…
Would the outcome be any different if CBRT kept the interest rates intact or went for a policy simplification? I guess we’ll never know.
The only thing we know is that the cost of funding is much higher now than it used to be and the exchange rates still remain in an uptrend. Accordingly, currency basket rises to a higher plateau compared to the week before.
“If it weren’t for us, exchange rates would have climbed higher” This is the argument CBRT will use to defend itself. As I have said, all statements are unfortunately deemed to be true until they are proven wrong.