Minister of Finance Mr. Ağbal’s “We will support the fight against inflation” statement marked Turkey’s weekend agenda. Why am I telling you this now? That is because we have all seen that their tax practices have brought significant negative impact on the inflation so far. The fact that inflation rate turned out to be higher than expected shows us the importance of Mr. Ağbal’s statement.
I was not expecting inflation rates to miraculously turn out to be lower than expected as I knew that both exchange rates and the high cost of living would simultaneously affect the CPI. Maybe this is the reason why exchange rates climbed higher on Friday. And to top it all, there is the possibility that credit rating agencies may revise their outlook on a number of banks and Turkey.
To tell you the truth, I recently lowered my expectations for the tension in Turkish markets will be reduced towards the elections. It looks like more and more people are expecting Central Bank to decide to hike rates one more time at their Thursday meeting, especially after the inflation data released yesterday. Rapidly rising benchmark rate is also another strong indicator of this expectation. It is obvious that the rates will continue to go higher as the Treasury gets into more debt.
Meanwhile, it has now become definite that the reason why the U.S. keeps fuelling the trade wars is that their desire for obtaining greater profits. Engaging into demoralizing action would not bring anything good to anyone, especially now when the World Economy has just started to get its strength back and the confidence indexes and the PMI data are slowly improving.
Speaking of the PMI, the data released on Friday has been by far the worst data that has been ever released. Purchasers must be feeling quite down because of ever increasing exchange rates. I just hope that things will get better after the elections.