Monetary policy pressures push Turkish inflation rate to 14%

In November, the value of the Turkish lIra dropped leading to an annual inflation rate of 14.03%. This new landmark has been the country’s highest since August last year which was a little bit more than 12.6%. After last month’s increase in the inflation rate in the country, there has been pressure for a tight monetary policy.

As part of the policy restoration, the central bank governor of the Turkish city of Ankara got changed last month. The bank also mentioned that this was an effort to target the country’s inflation rates as the country also struggles to recoup from the effects of the Covid-19 pandemic and as the cases continue to increase.

Authorities taking measures to reduce the effects of the new inflation rate

According to Lutfi Elva, Turkey’s minister of finance, the authorities will use monetary fiscal policy as tools to ensure that Thursday’s inflation rates are stabilized. He also said on Twitter that they are doing all they can to ensure that the effects of the high level of inflation in the country do not affect citizens. However, many people have been using currency trading resources to exploit the current situation and walk away with as much profit as possible.

The Turkish Statistical Institute stated that the consumer prices increased to about 2.30% month-on-month in November, as compared to the poll forecast by Reuters at 1.0%. Just about two months ago, the inflation rate in Turkey was 11.89%.

Turkish Lira record lows

The hard-currency imports of Turkey have increasingly become more expensive ever since reports surfaced about the country’s record lows that occurred last month. Reports state that it fell to 30%. This year, the inflation rate in Turkey exceeded the central bank of Turkey’s 3% to 7% goal for inflation significantly more than the emerging market counterparts.

After the inflation data came out, the Lira fell right down to an exchange rate of 7.9195 to the dollar. After the minister’s comments, it bounced back. It remained stable until the end of Wednesday.

This is not the only time that the currency dropped. Early in November, the Lira hit several record lows before getting to 8.58. It only rallied back after the central bank of Ankara promised that they will provide a new economic model.

This year, it continued to drop right down to 25%. People are currently using Bollinger Band to determine future and current trends for the Lira. And it also helps traders strategize. What are Bollinger band strategies in FX to begin with? And how do they work in general? They generally help traders know when to open and close trade and are also used to determine conditions that are oversold or overbought.

The prices of food and beverages increased, surprisingly causing an surge in the inflation rate to 21.08% as the budgets of households continued to face the effects of the pandemic as many individuals were out of work.

There was also a 29.42% jump in the prices of miscellaneous goods and services. At the beginning of the year, although there was an economic downturn in the country as a result of the efforts by the administration to combat the pandemic, the inflation rate was almost close to 12%.

At his first policy meeting, Naci Agbal, the new governor of the central bank increased the key rates by 475 basis points last month to 15% and is expected to face more pressure to further tighten the policies in December.

The CPI of Turkey increases more than expectation

According to a senior EM economist Jason Tuvey, the fall in the value of the Lira will increase the risk of central banks being pressured to implement tighter monetary policies. According to TD Securities, the emerging market counterparts of Turkey also reduced the net of the year’s monetary policy.

Tuvey continues by saying that this inflation rate might extend well into the coming months. There was also a 4.08% increase in the producer price index month-on-month last month for that data showed the 23.11% annual rise. Despite this, Turkish citizens are optimistic that monetary policies will be tightened further to resolve the issue.

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