✔ Decisions on policy rate cuts and loan utilization are part of the electoral practices launched in September a year ago.
✔ As Finance Minister Nabati said, the policy rate, which no longer matters, is likely to be lowered at least two more times, and the decrease in inflation in January will be explained with this interest rate cut.
There is an image that those who are fond of football often witness in matches. The referee only comes to them if there is a scuffle between two or three players and tries to calm them down. But if many players are involved in this scuffle, the referee will walk away and try to see all that is going on. No longer to the tree, that is, to a few football players; it’s time to look at the forest, that is, all the football players.
The reduction of the policy rate by one point on Thursday and the decisions of the Central Bank regarding loans the next day are also trees. However, we have a huge forest to look at. That forest is also a choice.
In fact, it must be admitted that it is a very frank economy management. When we look at what has been said before, the last thing that has been done is not considered to be anything to be criticized.
Before KKM was invented last December, it was almost effortlessly foreign currency After the rapid decline after the pull-up, Minister of Finance Nabati “The small saver made a loss” didn’t he say? Isn’t that a confession?
Also Minister of Finance “We preferred growth to inflation” didn’t he say?
Didn’t President Erdoğan also mention several times that his priorities are to increase growth, sustain investments and employment? Isn’t it stated that inflation is in a way suppressed for the sake of obtaining these?
Therefore, the decisions made at the end of last week are the last steps taken in this context. When I say the last steps, I do not mean that there will be no continuation, without any doubt, new steps will be taken until the election.
Many birds with one stone!
Economy management aims to kill several birds with one stone with the latest decisions. For example, was it necessary to cut interest rates the day before for the decisions announced by the Central Bank on Friday? It wasn’t at all!
But firstly, it is desired that these actions appear and perceived as a big package of measures, and secondly, another bird is targeted with the interest rate cut.
The summary of what was said to the banks with the decisions made on Friday is as follows:
“You will not give loans with high interest, if you do, the stick is ready, I will punish you. Also, don’t forget to fund the Treasury, we’re broke! Don’t be so sullen, look, there’s an open door; when you make loans to citizens, ie civil servants, workers, pensioners (if they can) Apply the interest you want.”
That’s the gist of Friday’s decision, what’s not explicitly stated:
“The wheels of the economy will turn at all costs until the election; Banks have already made a lot of profit this year, we have provided this, we have been so supportive, let’s share the bill now.”
But wait, it’s not over. As I said, it is very likely that we will see new decisions until the election.
Both shackle and support to banks
Let’s ask one more time; If the policy rate were not lowered from 14 percent to 13 percent, would the next day’s credit limit decisions be incomplete or could they not be taken at all?
Credit decisions could well have been made, right?
So why was the interest rate lowered?
After all, every decision is a choice. What will be the result of the decision regarding the loans; What kind of cost will there be, and more importantly, will all this cost be destroyed to the banks?
Of course not…
In a sense, an interest ceiling was introduced to banks for commercial loan interests, but on the other hand, their costs were reduced.
Banks, which will be funded by the Central Bank with lower interest rates, will also have lower rates for exchange-protected deposit accounts. interest will pay. Let’s remind; Interest ceiling policy interest + 3 points in KKM accounts. Therefore, the interest rate, which was 17 percent before, has now decreased to 16 percent.
As the interest rate is lowered, the gap between the exchange rate increase and the interest rate will widen, thus increasing the burden of the Treasury.
For example, the exchange rate increase in any quarter was 20 percent, the interest paid by the bank was 4.25, and the foreign exchange difference paid by the Treasury was 15.75. Now, maybe because the interest has decreased, the exchange rate increase will be 22 percent, this time the bank will pay 4, the Treasury’s burden will increase to 18.
What will happen if the decrease in funding and KKM interest is not sufficient and the banks do not agree to open loans within the interest ceiling? Restriction in credit volume or meticulous in customer selection.
Would you like to shrink the credit volume? If there is such a development, there will be a solution for it, what do you mean by making a decision?
Nabati was right; policy rate no longer matters
Lowering the interest rate, increasing the exchange rate… This is the biggest chain reaction that has pushed inflation up since last year.
What, when the interest rate cut was started last year, was it not known that it would increase the rate and inflation? Did you really find it believable how it was explained? If you can answer yes to this question, then you should also have an answer to which rate falls outside the limit of how and who decided it.
Nas was used as a cover, that’s all!
It will be used again; because it seems that the interest rate will be lowered even more in the coming period.
But let’s give it its due; Finance Minister Nabati was absolutely right on this issue. What Nabati said:
“We downplayed the policy rate.”
He is right, is there much difference between the policy rate being 14 percent and being 13 or lower in terms of impact on the economy; none!
But low interest rates have a huge impact as a discourse and influence, and this will be used.
At least two more interest rate cuts…
It is probable that another interest rate cut will come in December at the latest. Another discount may follow in January. The discounts, which I predict as December and January, can be brought forward.
Let’s leave the speech to be held on Friday, February 3, 2023 here:
“Didn’t we say that inflation will decrease as the interest rate decreases? There were those who sneered at us. Conclusion! Here’s how inflation has been going down for the last two months. We will continue to reduce the interest rates in the coming period and we will see that the inflation declines even more.”
Interest rate cuts will be made taking into account the 13.58 percent inflation in December and 11.10 percent in January, and the decline in annual inflation with the deactivation of these rates will be explained as the result of these interest rate cuts.
These interest rate cuts and the decrease in inflation that will be pretended to be thanks to these discounts “Unsold, Unused” to hold early elections… Is it possible to hold early elections without such an advantage? That’s why I don’t see any chance of an election before spring.
“Is it inflation, we make an additional hike!”
Everyone knows that inflation is now secondary. Let the wheels turn, that’s the only goal. Inflation also has an effect that lubricates the gears that keep these wheels turning.
Does inflation crush wage earners, it has a solution!
Once the inflation difference is given, people manage for a while with the perception that they have attained prosperity in the first place.
Are the minimum wage earners who could not receive the inflation difference, they were also given an additional increase in the middle of the year. What barrier is there to another increase in the fall? “Businesses Can’t Take It” do not say, there is a solution for it, it is even partially found…
The one who has the source knows no obstacles and can overcome any problem. Especially if he took the risk of inflation completely as he is now, and especially if he completely dared to win the election…