Okay am I missing something here? Europe has negative rates. The US has negative rates. But when Turkey lowers rates from 19% (!!?!!) to 14% it creates a “crisis”?
Anyways, current Turkish PPI is >50% (and it will only increase in coming months.). The real interest rate in Turkey is in far negative territory compared to US and EU, where they are desperate for inflation.
Well good news, they succeeded beyond their wildest dreams....
And they are still claiming government spending trillions is not the cause, and will not create new inflation..
So no, I dont believe they have acknowledged the problem at all, nor are they really going to address is. Sure the fed says they will wind down their buying, and signaled they might raise interest rates VERY VERY VERY minimally, they are acting as if demand caused by supply chain issues is the root cause
It is not
It is great for those with hard assets, it is TERRIBLE for the working poor.
Funny how many of the same people that claim to want to help the poor (democrats) have no problem with high inflation
Inflation is great for people in massive debt, or hold assets, and the rich
Inflation is terrible for savers, responsible people living with in their means, poor that pay cash for everything, etc etc.
https://fred.stlouisfed.org/series/T10YIE
https://fred.stlouisfed.org/series/T5YIE
(Alternatively you could suppose we’ll have inflation at x for one year and y on average for the next 9. If that’s the case I think the data above implies x=2.22% and y=4.7%, so I still think 6% is too much but maybe not totally crazy)
There is a big difference between lending at 0% when "natural" interest is .25% and lending at 14% when natural interest is 20%. If inflation is 18% you're effectively giving consumers 4% return on borrowed money, which means everyone will borrow as much money as they possibly can and use it to purchase goods.
In the US, inflation is nearly at 7%, while savings accounts yield around 0.05%. Doesn't that mean Americans are discouraged from keeping money in savings accounts about the same amount as Turks are?
If you believe American inflation will remain there, yes. Few do. (Also, the Fed is tightening.)
The current belief is that the fed will manage inflation appropriately, and that the 7% headline number will vanish in a few months. Housing increasing 20% last year is a sign that the same incentive is there, getting a mortgage at 2% and then earning a free 5% interest is too good a deal to pass up.