While the markets followed a calm course on the last trading day of the year, the upward movement in the exchange rates that started at the beginning of the week continued today.
In the afternoon, the dollar rose to 18.73 liras and the euro to 20.03 liras.
The euro started 2022 at 15.04 and the dollar at 13.29 lira.
With today’s rises, Euro/TL increased by approximately 33 percent and USD/TL increased by 41 percent throughout the year. The rise in the dollar index, which shows the performance of the dollar against the main currencies, remained at 8.1 percent.
Globally increasing inflation and the central banks’ withdrawal of the interest weapon against inflation were effective in the rises against the TL.
CONTINUING INCREASE IS EXPECTED IN 2023
In the last 7 meetings, the US Federal Reserve (Fed) increased the policy rate by 425 basis points in total to the range of 4.25-4.50 percent. While the Fed made the last 50 basis points increase in interest rates in December, a dotted chart showing the expectations of Fed officials regarding the direction of monetary policy was also published. Accordingly, Fed officials predicted that the policy rate will rise to 5.1 percent by the end of 2023. The average expectation for 2024 was 4.1 percent.
In June, annual inflation in the USA reached 9.1 percent, its peak in 40 years. As of this date, inflation has turned down with the effect of interest rate hikes. Finally, in November, annual inflation was announced as 7.1 percent, against the expectation of 7.5 percent.
Despite this development, which can be considered positive, Fed Chairman Jerome Powell gave the message in his latest statement that he has a lot of work to do and that interest rate hikes will continue until he sees strong evidence of a permanent decline in inflation.
RECORD INFLATION IN EUROPE
On the European side, the ECB received criticism that it was late in raising interest rates compared to the Fed. Annual inflation in the Eurozone broke a record in October with 10.6 percent, especially with the increase in energy prices. Annual inflation, which declined to 10.1% in November, continued its course in double digits.
ECB WILL CONTINUE TOO
The ECB increased interest rates by 50 basis points in July and 75 basis points each in September and October. Finally, at the December meeting, a 50 basis point rate hike came. In the statement made by the ECB following the last decision, it was stated that the inflation outlook was revised upwards significantly and further interest rate hikes are expected. It was stated in the statement that it was decided that interest rates should increase significantly at a steady pace to ensure that inflation returns to the medium-term target of 2 percent, and that future interest rate decisions will depend on the data.
CBRT FOLLOWED A DIFFERENT PATH
While interest rate hikes around the world were on the agenda, the CBRT followed the opposite strategy. The Central Bank’s Monetary Policy Committee (PPK) lastly kept the one-week repo auction rate, which is the policy rate, at 9 percent, in line with the expectations, at its December meeting.
MPC had lowered the policy rate by 150 basis points in November to single digits after two years. In the August-November period, a total of 500 basis points of interest rate cuts came.
While annual inflation in Turkey rose to 85.5 percent in October, it declined slightly to 84.39 percent in November.
| Moon | Annual inflation (%) |
| Nov.22 | 84.39 |
| Oct.22 | 85.51 |
| Sep.22 | 83.45 |
| Aug.22 | 80.21 |
| Jul.22 | 79.60 |
| Jun.22 | 78.62 |
| May.22 | 73.50 |
| apr.22 | 69.97 |
| Mar.22 | 61.14 |
| Feb.22 | 54.44 |
| Jan.22 | 48.69 |