Mirror, mirror…

The week took an interesting turn. During the weekend, we’d heard sharp statements about those who move their wealth out of the country, and then the owners of these statements said, “There’s been a misunderstanding”. Even the excitement of it was enough to trigger exchange rates. USD/TRY fell sharply. Sadly, those who panicked too much have incurred some losses.

Although the fact that it has been reported that the latest inflation rates were the highest recorded levels in the recent years did not break the morale too much, talks against the capital mobility have upset everyone. The following statement helped market get calmer again, however, I will continue to make the same warning:

“Those in foreign currency debt should buy foreign currency whenever it tends to drop”.

Now, let me deliver my comments on the inflation: At this rate, Medium-Term Plan will fail to achieve the “5% inflation” goal; because, price surges will be unavoidable unless core inflation is taken under control. There’s constant rise in many important goods and services listed in the index, especially in food products.

A statement from Ankara has particularly caught my attention: “Inflation will drop swiftly as of December”. We heard the Government make similar statements before, if my memory serves me correctly. To tell you the truth, a significant decrease in inflation will certainly require a “fine-tuning” in inflation indexes, which we should better avoid.

In short, there’s a claim that Turkish economic growth might hit double digits, which is encouraged by the fact that the numbers have not been announced yet. However, inflation leaps to 13%, exchange rates to 13,5% and unemployment to 11%.

Since Turkey keeps growing at full speed, then the famous “inflation will fall when the output gaps is closed” statement must be invalid. I also must say that something is definitely not right given unemployment rate cannot fall back to single digits.

Here is my suggestion for those who consider the current interest rate quite “high”, especially in a country full of risk and strange absurdities: “Take a look at yourself in the mirror”.