On Thursday, Turkey’s Central Bank (CBT) maintained a weekly repo 46%rate, matching a wide consensus. However, he also maintained the highest lane of the 49% speed corridor (loan indicator during the night), which many expected. The rate of incurring loans was 44.50%day by day, according to the forecast.
CBT said that inflation will probably fall, but the growth will probably ponderous down. The last choice to take a relatively hawk position in the field of interest rates effectively expands the period of interruption in politics, which is the way to resume the inheritance rate of the expected this summer.
The Bank’s Policy Committee said again what he said earlier: that the restrictive monetary policy would remain in place until the price stability is achieved by a constant decrease in inflation.
CBT also said that he would carefully change the politics rate, looking at each meeting separately and first of the inflation forecast.
Market reaction
After the CBRT interest rate decision, Turkish Lira (sample) trades the weaker, leading to USD/tries to reach the highest level from mid -March, around 39,5500.
Frequently asked inflation questions
Inflation measures the enhance in the price of a representative basket of goods and services. Header inflation is usually expressed as a percentage change based on month to month (Mom) and year on year (Yoy). Basic inflation excludes more unstable elements such as food and fuel, which can change because of geopolitical and seasonal factors. Basic inflation is the number of economists focus on the level of central banks, which are authorized to maintain inflation at a management level, usually about 2%.
The consumer price indicator (CPI) measures the change in the prices of the basket of goods and services over time. This is usually expressed as a percentage change on the basis of month to month (Mom) and year on year (Yoy). Core CPI is a number directed by central banks because it excludes unstable food and fuel cartridges. When Core CPI increases above 2%, it usually causes higher interest rates and vice versa when it drops below 2%. Because higher interest rates are positive for currency, higher inflation usually causes a stronger currency. On the contrary, it is true when inflation falls.
Although this may seem contrary to intuition, high inflation in the country increases the value of its currency and vice versa for lower inflation. This is due to the fact that the central bank usually raises interest rates to combat higher inflation, which attracts more global influx of capital than investors looking for a lucrative place to park their money.
Earlier, gold was investors of assets, to which he turned to high inflation, because it retained its value, and although investors often buy gold for his secure real estate in times of extreme market riots, this is not the most of the time. This is because when inflation is high, central banks set interest rates to combat it. Higher interest rates are negative in the case of gold because they enhance the costs of having gold in relation to assets on interest or place money on the cash deposit account. On the other hand, lower inflation is positive for gold because it lowers interest rates, thanks to which radiant metal is a more profitable investment alternative.
