BY ALAATTIN AKTAS
Savings are like cats; they don’t do well when they’re cornered. If you corner a cat, it will quickly attack when you least expect it. While you think that you have restrained it, it squirms out of your grasp, finds a way out, and runs. Savings have been like a cat that is cornered for a while. Now we’re holding on to them but they will escape soon. The barrier that account owners are using to cage in their savings will be destroyed.
January was a month of frustration
The Turkish Statistical Institute (TurkStat) released the real profit rates created with financial investment for January. Both nominal profits and Consumer Price Index (CPI) and Domestic Producer Price Index (D -PPI) increase adjusted real profits are included in TurkStat’s statement. Here is the situation as of January: The first thing to note is that no real profit was provided by investment instruments in January. Additionally, losses exceeded 8%.
The second fact is that there was a loss in both deposit accounts and government debt securities (GDS) not only in January but over all periods recorded. Those, who preferred deposit accounts have lost TRY 23 out of TRY 100, and those who preferred GDS lost TRY 33 out of TRY 100 due to inflation over the last year.
The third fact is that there is a real profit in equities, foreign exchange (FX), and gold with a maturity of more than a month. The annual real profit on the stock exchange is the exception. Stock exchange investors experienced a loss in real terms in the last year.
What happens next?
The interest rate of deposit accounts and the return of GDS are clear. You know what you will earn with which maturity if you open a deposit account or acquire GDS.
But it’s almost impossible to predict what kind of return will emerge from other instruments. We previously stated that those who choose to use FX-protected TRY deposit accounts will probably experience around a 4% interest rate in April. The FX rate hike will be paid if it increases more than the interest rate. But every nerve is strained to ensure that FX rates don’t increase.
Apparently, the government will try to protect the current level of FX until at least April. Will citizens comply with a 4% interest rate against 3-month inflation that will hover around 25% in April?
Or will citizens, who have never preferred FX-protected TRY deposit accounts, and stood by the TRY, tolerate an interest rate of 20% against a price hike that will exceed 60% on an annual basis?
FX demand may be inevitable after holding on to a TRY is that much ‘punished’. If the demand for FX jumps, this rise in rates can’t be stopped even if billions of dollars are sold every day.
That’s why I’ll remind you of this once again. Pay attention to the inflation that will be announced on April 4 and what happens afterward.