BY ALAATTIN AKTAS
Treasury and Finance Minister Mehmet Simsek said Turkey has no other choice than to return to a rational ground when he assumed the mantle. The Central Bank shows the same approach now. The policy rate was increased. The Monetary Policy Committee (PPK) members, except for Governor Hafize Gaye Erkan, put their signatures to a statement, which is the exact opposite of the previous PPK statement. Moreover, the PPK summary included such expressions that almost ripped previous implementations and the management to pieces:
►“Considering the inflation outlook and the upside risks, the PPK assessed that the current monetary policy was far from achieving the inflation target of 5%. The PPK underlined that deterioration in price stability was threatening macroeconomic stability and, in particular, financial stability. Accordingly, the PPK decided to implement a monetary tightening process, the steps of which will be strengthened as much as needed in a timely and gradual manner. The monetary tightening process will continue until a significant improvement in the inflation outlook is achieved.”(Look at the harsh and sharp expression in the first phrase. It is clearly stated that the current monetary policy is wrong.)
►“The PPK sees the decision to raise the policy rate from 8.5% to 15% as the first step of the monetary tightening process.” (The rate hike will continue. But it is wondered if there is a limit.)
►“The PPK has evaluated analyses on the impact of the monetary tightening process on macroeconomic and financial conditions. The impact of rate hike scenarios on key macroeconomic variables such as inflation, credit growth, credit and market rates, economic activity, and expectations as well as stress tests on banks have been evaluated. The inflation outlook necessitates taking new steps to achieve the goals.” (There is a criticism about doing nothing and making a mistake while doing something…)
►The PPK concluded that inflation, which has drifted away from the target, calls for the effective use of the monetary policy. The monetary tightening process will increase the effectiveness of monetary policy. (The inflation target is 5%. But inflation hovers around 35-40%.)
►“In addition, the PPK evaluated that the current micro and macro-prudential framework fell short of supporting the macro-financial stability and distorts the functionality of market mechanisms. Therefore, a simplification policy has been adopted. The existing micro-and-macro-prudential framework will be simplified to increase the functionality of market mechanisms and strengthen macro-financial stability. It was decided to implement a gradual simplification policy for a smooth transition period.” (There is a harsh criticism in the first phrase. Could it be said wrong ?)
