The Illusion of Making Money…
The most striking detail in the official inflation rates was the fact that the core inflation turned out to be higher than the CPI. The core inflation is around 47% compared to the CPI, which is 3.92% on a monthly basis but is around 38% on an annual basis. This data shows us that the decline in inflation is due to the base effect and is only seasonal. So, it is quite likely that the CPI will potentially rise again in the autumn.
On the other hand, it is not being discussed yet whether there is a possibility of a considerable rate hike based on the rise in monthly inflation, especially after the MPC’s statement that “previous policies were harmful”. I think that the CBRT will introduce only a slight hike this month or keep it intact. To confirm this forecast, I took a look at the deposit interest rates offered by the banks.
Private banks tend not to let their interest rates surpass 40% for the time being, so do the public banks. This probably is a “cautious stance” before a possible rate hike. On the other hand, the demand for the KKM scheme continues. While there is a significant increase in the number of foreign currency deposits, the constant rise in KKM as well shows us that the foreign currency trend continues, and that an instrument similar to foreign currency can very well be substituted for it. If KKM interest rates had been liberalized from the very beginning, it would have been possible to get through this ordeal with fewer damages. We can get through bad experiences with the least damage possible, if we manage to approach problems more calmly and less hastily. But for some reason, we always fail to do so.
The KKM scheme is rapidly gaining popularity as it is a suitable investment instrument for Turkish people who love to win no matter what the circumstances are.Banks’ KKM rates vary between 35% and 40%, which lead depositors to enjoy interest, thinking, “Apparently, I still can grow my savings regardless of the direction exchange rates move”. If the situation had been like this from the very start, depositors’ return from foreign currency to TRY would be much faster. I hope we learned our lesson from this experience.
However, there’s also the fact that no interest rate and foreign currency earnings have the power to balance the exorbitant price increases in essential goods and services. Those who enjoy short-term monetary joy with higher interest rates, or appreciation of foreign currency and other assets will realize sooner or later that actually they can barely protect themselves against the high cost of living. So, given the current circumstances, I maintain my projection that there will not be any noteworthy improvement in economy until the elections.