Turkey: monetary chaos after the latest change at the helm of the Central Bank
A temporary job is that of governor of the Turkish Central Bank: in two years we are at the fourth turnover. Orban has a not very idyllic relationship with his governors and, I dare say, above all with the reality of economic facts.
The Istanbul stock market has had the biggest fall since 2013 and then recovered slightly.
To calm markets, Yigit Bulut, a senior adviser to Erdogan, said the central bank would avoid any extraordinary steps under Agbal's successor, Sahap Kavcioglu. He also reiterated Erdogan's monetary policy theory that high inflation is caused by high interest rates and not vice versa….
However, it will be extremely difficult to restore foreign investor confidence in the country's battered financial system now that the central bank is officially Erdogan's toy. As Reuters notes, although the index briefly turned positive on Tuesday in conditions of high volatility after an initial decline, analysts said foreign investors are moving out of positions. They take the money and leave.
Meanwhile, the lira plummets, returning to the lows of 2020.
to prevent speculating on the downward Lira, interest has skyrocketed, reaching 10,000%, and then settling at a “Healthy” 600%.
all this happens because, after a slight surplus (black curve in negative) in 2018, the Turkish current account went back into a very strong deficit in 2020, due to the covid and the disappearance of the lavish tourist flows that also brought strong currency.
The Lira devalued to balance the current account deficit, but Erdogan, being a strong man, cannot accept a currency that is too weak. Politics wins over economics and logic. It almost seems like the Italy of the Euro, to, as here, someone pays the consequences, in Turkey as in Italy …
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The article Turkey: monetary chaos after the last change at the helm of the Central Bank comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/turchia-caos-monetario-dopo-lultimo-cambio-all-guida-della-banca-centrale/ on Tue, 23 Mar 2021 19:10:19 +0000.