Well, nothing. But the monetary authority of this country seems to be quite proud of its decision as if the single-digit policy rate would really help improve something. Frankly, we do not need low-cost funds.
The money base has quadrupled in over a year, but there is no money available, people are having trouble accessing funds. Deposit rates are around 1/6 of inflation rate, and loan rates are nearly 1/3 of it. People do not want to deposit their savings in banks with this level of interest, the money that is withdrawn from FX-hedged deposit accounts flows to the stock market or stockpiling. Banks avoid lending the funds that they bought for low prices while incurring losses from the government securities they are forced to acquire.
Government says that the number of people applying for loans this year has doubled compared to last year, but when we looks at the inflation-adjusted and exchange rates-adjusted figures, we see that this is not the case. The lending volume naturally increases due to providing the same funds over and over again in a short period of time. The price of any service increased two and a half times compared to last year, which obviously increases the need for borrowing. How can one possibly call this a rapid credit growth?
“People eventually get used to both good or bad fortune”
It is useless to say to people, “Just don’t get it”, because no matter the costs, everyone is looking for financing to fill their insufficient capital. It is also ridiculous to accuse them of buying foreign currency with the money they earn, but it is equally ridiculous to try to protect your money by buying foreign currency. Since buying foreign currency does not protect anyone against price increases, but it is not fair to blame those who put some foreign money aside because they want to be on the safe side, just in case, and because there is no other option.
There are two paths we can choose to follow: either going back to the old ways or keeping things as they are and getting used to it. I don’t think we can revert back to the old ways quickly. At least not in the medium term. So, we will have to get used to the current circumstances. And when it’s time to re-embrace the old normal, there will be many naysayers. That’s the downside of getting used to something.