Central Bank should be careful about the stagflation

The fact that a number of banks’ outlook has been changed to negative marked last week in Turkish economy. And, high inflation will quite probably mark this week.

Our expectations obviously remain low, anticipating base effect-triggered even higher inflation rate than now towards the autumn. Meanwhile, Trump continues to fuel trade wars with further action. Turkish election is just around the corner, but we should know that global events may bring equally huge impact on our lives as the elections.

All we think about is dollar’s future. We are not getting along well with U.S. We owe euro-denominated debt but we are not on very good terms with the Europe either, and Israel even though our financial system is mostly dominated by Jewish people. However, we are not the only ones to blame for the present situation. No one can deny that the U.S, EU and Israel have done some very bad things in terms both diplomacy and humanity. And they always come up with a certain reason or pretext for what every kind of harm they cause. On the hand, Turkey has slowly walked away from its moderate conduct of asking the other parties to use more common sense and sound judgment, and finally became a party to the world’s every huge political problem, in which case it would, after all, be very naïve of us to expect stable markets.

“Watch out!”

Now, with elections approaching, it is of utmost importance for Turkey to avoid taking actions that might intimidate citizens, investors or startle them into a state of panic, since, everyone already seem quite tense because of credit rating agencies’ latest ‘negative’ release on Turkey’s and numerous banks’ outlook. And it is almost for sure that inflation will turn high as expected. To top it all, if leaders start delivering confusing harsh messages during election rallies, USD/TRY would inevitably hit 5.00. Inflation plus stagnation, also known as stagflation, risk may rise, should the Central Bank decides to hike rates at their Thursday meeting. USD/TRY will reach above 5.00 sooner or later. Just like it hit first 2.00, 3.00 and then 4.00; because, actions taken to stabilize Turkish lira’s value can definitely not be considered emergency responses… As I have provided you with extensive details of this matter before, I may give you a little reminder in the upcoming days.