The US should draw lessons from Turkey!

A new week kick off with Italian elections and positive steps towards the formation of a new government in Germany.

Italy had fallen into political void after with PM Renzi’s resignation after referendum defeat. It was no other than Berlusconi who took advantage of this void. According to political experts, elections that took place yesterday in Italy are a giant step by Berlusconi towards coming to power. I guess we will just have to wait and see.

In Germany, SDP’s approval for coalition talks with Merkel has resulted in Euro’s appreciation against dollar. Meanwhile, in Turkey, Euro/TRY kicks off the week strongly. However, USD/TRY remains strong as well. There is high demand for foreign currency. “From where you pick that ?” you might ask. From the currency basket obviously…

“Politics on the foreign front, economy on the home front…”

Two major economic developments are to take place in Turkey this week.

  • Inflation rate to be announced today
  • CBRT’s interest rate decision to be announced on Wednesday

Although Ankara keeps delivering highly bold statements like “Inflation will hit single-digit”, the base effect in the first-half of the year will turn negative in the second half. So, that “single-digit inflation delight” may last shorter than expected.

I don’t think Turkish Central Bank will make any changes to interest rates until Fed makes its move.

So, this week Turkey will have to deal with politics on the foreign front, and with economic developments on the domestic front. Trump’s threat to impose import tariffs is surely not forgotten. Turkey is a great example of the fact that such moves do not actually bring any advantage to foreign trade deficit. For certain matters, America should draw lessons from Turkey. Not a positive example but useful indeed.