Since 2006, when inflation targeting was introduced, the Central Bank was constantly talking about price stability and that inflation would stabilize at the 5 percent target. However, since 2006, this target has almost never been achieved. Since inflation targeting was introduced, the target was met only in 2009 and 2010. It is stated that it is not the success of the implemented policies, but the contraction in production and demand in the global and local economy.
The Central Bank, which has not been able to find its target in inflation for 15 years, except for 2 exceptions, has taken a step back in terms of inflation (despite the discourses of autonomy, of course, with the clear effect of political orientation) due to the pressure of the point reached? Are price stability and inflation targets lower in the Center's priority list after this time?
The statements of the head of the Central Bank at the Inflation Report meeting last week raise these questions. It seems as if the president, who displays a style that values harmony with politics rather than autonomy, speaks as if he put price stability and reducing inflation, which has been the top priority of the bank, on the shelf, and that he appears in front of the public with a new priority.
Chairman Kavcıoğlu says, “We do not have a foreign exchange target, our aim is to reduce the current account deficit”. The President also says that there are deviations in the bank's inflation forecasts and announces the new forecasts. The Central Bank raises its 2021 inflation forecast from 14.1% to 18.4%. Here, there is a deviation of 30.5 percent, which is quite a big deviation. Is it because of such large deviations or errors that the price stability and inflation reduction targets are abandoned and the current account deficit is placed in the first place in priority?
The deviation in food inflation also exceeds 50 percent and is updated from 15 percent to 23 percent. Is there any problem in analyzing food inflation, which is shown as one of the main causes of inflation, so wrongly and building a forecast on it? Will the policies implemented from this point of view not be as consistent(!) as the estimates? It's normal when you see practices such as warehouse and market raids and scapegoating chain stores.
Central Bank Governor Kavcıoğlu says that when we have a current account surplus, we will ensure financial stability and price stability. It probably didn't take that long to realize that. As a result, the current account deficit is one of Turkey's main structural problems and it did not appear out of nowhere. It is a situation that needs explanation that the "price stability", which has never been popular until now, has taken its place. Is it an implicit admission of being inadequate and unsuccessful in the fight against inflation?
Saying that "Turkey's 5 percent current account deficit, 5 percent growth and 5 percent inflation policy that has been implemented for many years has contradicted price stability and has not been sustainable," the President emphasizes the 5 percent inflation target even in his inflation report. It is not convincing to say that the Central Bank is not interested in the exchange rate, especially when the 128 billion dollar reserve issue, which is said to have been spent in the last 1.5 years to suppress the exchange rate, has not been fully explained… If the bank was not interested in the exchange rate, why these transactions were carried out, the public is still satisfied. could not find any information.
Let's reduce the current account deficit, but how? As the exchange rate increases, that is, as the TL becomes worthless, our goods will become relatively cheaper and our exports will increase. As imports become more expensive, they will decrease and the current account deficit will also decrease. So, as an economy that needs the import of intermediate goods to produce, how will we produce the goods that will be exported under these conditions? The Central Bank probably took into account that the current account deficit, which fell in the short-term, might have repercussions in the medium and long-term in the form of a decrease in production and a contraction in growth. It is a matter of curiosity how an economy that grows in response to current account deficit and inflation will eliminate the current account deficit without implementing structural reforms. The truth in the middle is this: The economic administration, that is, the government, which cannot cope with inflation and the cost of living and makes it even more difficult with wrong policies, does not take responsibility for this issue either and prefers to get rid of this issue by throwing the ball on the Center. The Central Bank also finds the solution by changing the target...
Declining incomes and subsistence conditions, which are becoming more difficult to bear, are falling to the share of the citizens.