While the index hit a new high, inflation in many countries around the world soared sharply. The exchange rate of major currencies around the world against the US dollar also generally fell sharply.
chart/As of the latest on September 9, the appreciation of the US dollar against foreign currencies in the international foreign exchange market has reached a new high in the past 20 years. Source: wind
Recently, Xinhua News Agency published an article pointing out that from Argentina to Tunisia , from Germany to Turkey , inflation levels in many countries are high, and prices are rising steadily. This is closely related to the negative spillover effect of the radical adjustment of the US monetary policy of . once again highlights the harm of the dollar hegemony disrupting the global economy.
Figure: Since the beginning of this year, 18 currencies around the world have fallen by more than 10%, and 5 currencies have fallen by more than 20%. Four of the world's five major settlement currencies fell across the board against the US dollar, with the yen falling by more than 19%. Source/ Securities Times ·Data Bao
Turkey's inflation deteriorated: CPI broke through 80% in August, and the exchange rate fell by nearly 30%
In the haze of global inflation, Turkey's performance is particularly dark.
days ago, the Turkish Bureau of Statistics released data showing that Türkiye's CPI in August increased by 80.2% year-on-year, setting a record high since September 1998.
The market is not surprising to the deterioration of inflation in Turkey. After the inflation data was released, the exchange rate of Turkish lira against the US dollar did not show a significant decline, and it has generally maintained a slight downward trend in recent days. Judging from the performance of this year, the lira contracted 27% against the US dollar, down 44% last year.
It is worth noting that at a time when the world's major central banks are hiking interest rates raising resistant to inflation, Türkiye is moving in the opposite direction. From September to December last year, the Turkish central bank cut interest rates four times in a row, down 500 basis points. In the first seven months of 2022, the Turkish Central Bank maintained the benchmark interest rate unchanged, and continued to cut interest rates by 100 basis points to 13% in August.
In the eyes of Yu Jia, an analyst at China Chengxin International Business Department, Türkiye's extremely loose monetary policy has also had significant side effects while driving economic growth. "Türkiye's domestic inflation increased significantly in the last few months of last year. With the weakening of the lira and the increase in dollarization, the overall economy faces certain hard landing risks." Yu Jia told 21st Century Business Herald reporter.
8 CPI broke through 80% in August 8
In August 2022, Türkiye's CPI annual rate exceeded 80%, the first time since 1998, and was slightly lower than analysts' general expectations of 81%. After the
data was released, the market did not show excessive fluctuations. On the day the data was released on September 5, the Turkish lira also achieved a 0.2% increase against the US dollar. CPI data in recent months show that Türkiye's inflation has been deteriorating for a long time. In December last year, the country's CPI annual rate was 36%, and in January 2022 it reached 48.7%, and then continued to rise, reaching a historical high of 79.6% in July, and in August it broke through 80% without surprise.
But in the face of such high inflation, the Turkish central bank still lowered 100 basis points to 13% in August this year. Even as major central banks around the world have successively entered the wave of interest rate hikes, the Turkish central bank still goes against the trend. It is worth noting that from September last year to the present, the central bank has cut interest rates by five consecutive times. It can be seen that Turkish President Erdogan's unconventional economic theory is still affecting the country's monetary policy . In addition to inflation, Türkiye's current account deficit problem is also obvious. According to data from the Turkish Central Bank, Türkiye's current account deficit in June was US$3.46 billion, which narrowed significantly from May, but the overall situation is not optimistic. The currency lira has been falling again and again. The lira exchange rate against the US dollar fell by 44% last year, and the decline has been 27% this year.
has been falling with the lira value, coupled with The pace of the Federal Reserve's interest rate hike has not slowed down, and the outside world is increasingly concerned about Türkiye's debt default risk. According to the announcement of the Turkish Ministry of Finance, as of July 31, 2022, the central government's debt stock was 3620.7 billion lira (approximately RMB 1380 billion).
Yu Jia believes that "with Turkey's already huge external refinancing demand rising, combined with the situation where foreign reserves are already at a negative value after deducting reserve requirements and swaps , the debt default risk of Turkey's borrowing entities has increased.But the positive side is that Turkish banks and large enterprises are often able to successfully extend loans due. In addition, as of the end of June, foreign investors only held about 1% of Türkiye's domestic bond issuance, accounting for a very low proportion, which also reduced the risk of further capital outflows and exchange rate fluctuations. In terms of government foreign debt, Türkiye's government's demand for refinancing is relatively low compared with the private sector, and as of now, the financing plan in 2022 has been completed by about half. "
The interviewed experts are not optimistic about the country's subsequent economic trends. Standard Chartered Chief Investment Strategy of China's Wealth Management Department told the 21st Century Business Herald reporter that Turkey's economic situation is deteriorating. "We expect that the decline in consumer confidence and purchasing power caused by high inflation will make total demand weak in the second half of the year, and the tightening of the global financial environment and the negative impact of the Russian-Ukrainian conflict will further cast a shadow on the outlook. Although Türkiye's GDP increased by 7.6% year-on-year in the second quarter, we maintain our forecast for its GDP growth of 3.0% this year. "
adheres to the low interest rate policy
In Erdogan's eyes, high interest rates are the "mother of all evils" and should promote growth with loose policies. That is, "stimulate investment with lower interest rates, increase exports and decreases in imports at low exchange rates, thus leading to high growth in current account surplus and employment rates, and thus stimulate economic performance."
According to the data, Turkey has indeed achieved remarkable growth results in recent years. In 2020, the country's annual GDP grew by 1.8%, becoming the whole One of the few countries that achieved positive economic growth during the outbreak of the new crown epidemic. Turkey's annual economic growth rate reached 11% in 2021.
Researcher at the Institute of International Trade and Economic Cooperation of the Ministry of Commerce Mei Xinyu told the 21st Century Business Herald reporter: "In the more than ten years of Erdogan's rule, Turkey has grown rapidly by lowering the savings rate and increasing the investment rate. However, it has also led to an expansion of the savings-investment gap and a current account revenue and expenditure deficit, which has also stimulated the high foreign debt. "
The situation has changed now. "In the environment where major central banks in the world have maintained relatively loose monetary policies for a long time, this set of 'Erdogan Economics' has been effective. When major central banks withdraw from quantitative easing and implement balance sheet reduction, Turkey's balance of payments and debt, exchange rate crisis, and capital flight risks are all emerging, and economic growth is also weak. " Mei Xinyu said.
Turkey, with high inflation and a current account deficit, has chosen one way to go. The 2023-2025 economic plan recently announced by the Turkish government shows that the country will continue to adhere to a low-interest rate policy, give priority to production, growth and exports, strive to stabilize the exchange rate, reduce inflation, and achieve current account surplus. This set of "interest rate cuts and anti-inflation" strategy is really unreasonable in Mei Xinyu's opinion.
Wang Xinjie believes that the transformation of Turkey's monetary policy into eagle will be the only effective tool to reduce inflation, "However, the Turkish Central Bank is the most dovish emerging market central bank. We believe that the possibility of such a transformation before the 2023 election is very small." Why does
insist on low interest rates so much? Mei Xinyu believes, "This is the continuation and development of Erdogan's economic policy. Due to Erdogan's political base, he has a strong intrinsic motivation to maintain lower interest rates and higher investment rates. Erdogan's rise in politics is two major forces: Islamic groups, rural and urban shantytown rural immigration. Large-scale public works investment is beneficial to these aspects (investment benefits and employment positions). Naturally, Erdogan is increasingly opposed to the interest rate hike policy that will increase the cost of investment in public works. "
In fact, Turkey is also trying to deal with inflation through fiscal means such as supplementing budgets and raising minimum wages. But in Wang Xinjie's view, as inflation further rises, the impact of these fiscal measures in may be limited.
As for whether Turkey will implement capital controls in the future, Mei Xinyu believes that "according to Erdogan's governing style, the possibility of implementing capital controls cannot be ruled out, but the probability is much lower than 50%. Because he still needs to use the international capital market to finance, the implementation of capital controls will have a great impact on his international financing. He is not expected to seek capital controls unless it is absolutely necessary.However, even if capital controls are implemented, it will be difficult to work from the perspective of Türkiye's economic and social situation. "
institutions predict that Argentina's inflation rate will reach 95% in 2022
According to CCTV Finance, the inflation level in Argentina has been rising since the beginning of this year, and the country's cumulative inflation rate has reached 46.2% in the first seven months of this year. The market expectations survey report released by the Argentina Central Bank on the 39th showed that the country's inflation rate will reach 95% in 2022. report predicts, 2023 In 2024, Argentina's inflation rates were 84.1% and 63.1% respectively.
Argentina's central bank raised the benchmark Leliq interest rate by 950 basis points in August, raising it from 60% to 69.5%.
Xinhua News Agency commented: High inflation in many countries highlighted the harm of the hegemony of the US dollar
According to Xinhuanet html l3 reported that in recent months, from Argentina to Tunisia, from Germany to Turkey, inflation levels in many countries have been high, and prices have been rising steadily. This is closely related to the negative spillover effect of radical adjustments in US monetary policy, once again highlighting the harm of the hegemony of the US dollar disrupting the global economy.
Since March this year, the Federal Reserve has continuously aggressive interest rate hikes in response to high domestic inflation in the United States, driving the US dollar to appreciate significantly. As the US dollar dominates the international monetary system , the grain Food, oil, natural gas and many other commodities are mainly denominated and settled in international trade . The appreciation of USD means that import costs in many countries have risen and the pressure of imported inflation has intensified. Bloomberg reported that the United States exports inflation to the world through interest rate hikes.
htmlOn July 27, Federal Reserve Chairman Powell attended a press conference in Washington. The Federal Reserve announced a 75 basis point rate hike on the same day. Xinhua News Agency reporter Liu Jie Photo After the Ukrainian crisis escalated in February this year, the economies of many countries have been significantly impacted, and the global economic growth prospects are not optimistic. Western sanctions on Russia have also caused the price of commodities such as natural gas and oil to soar. Against this background, the Federal Reserve's interest rate hikes export inflation to the world, putting more pressure on people in many countries' lives.
In Germany, more than two-fifths of Germans said they could not maintain their current living standards due to rising prices. In Lebanon, soaring prices have forced many people to give up buying sugar The tradition of fruit pastry entertaining relatives and friends. In Turkey, some taxi drivers reported that the sharp rise in oil prices eroded the "purse" and their purchasing power shrank significantly. According to Xinhuanet, citing the US " Wall Street Journal ", while many countries in suffer from the appreciation of the US dollar, the United States has eased inflation pressure.
Because the US dollar dominates the international monetary system, the Federal Reserve's aggressive interest rate hike has also exacerbated the risks of capital outflows in many countries, the depreciation of local currency in , debt defaults, and other risks. Some economic fundamentals are fragile and foreign exchange The economy with insufficient reserves was hit. The Australian East Asia Forum website recently reported that there are worrying similarities between the current situation and the situation in the early 1980s.
At that time, the Federal Reserve raised interest rates to curb inflation, triggered a debt crisis in Latin America, economic growth in many countries plummeted, and unemployment and poverty rates surged. Some American scholars recently said that several countries have defaulted on debt due to the Federal Reserve's interest rate hike.
It is worth mentioning that the Federal Reserve The reason for this round of interest rate hikes is the rise in US inflation, but the rise in US inflation is precisely due to the US's own economic decisions. In recent years, the United States has adopted a super-large-scale stimulus policy in response to the impact of the new crown epidemic, and the fiscal deficit soared, and the currency is seriously over-issued. Last year, American economics people issued a warning that the ultra-loose fiscal and monetary policies adopted by the United States may trigger "inflation pressure that has never been seen by a generation."
This is the Federal Reserve building photographed in Washington, USA on June 1. Xinhua News Agency reporter Liu Jie Photo
The hegemony of the US dollar brings "arrogant privileges" to the United States. When it is necessary to boost the economy, the United States injects liquidity into the market through extraordinary means such as quantitative easing, stimulating US economic growth; when inflation is high, the United States suppresses interest rate hikes and tightens, and attracts international capital to return to the United States. The United States abuses the hegemony of the dollar and has repeatedly reaped global wealth through radical adjustments in monetary policy, causing market turmoil, and reaping global wealth.
The United States "weaponized" the US dollar with the influence of the world currency, exposing its irresponsible and extremely selfish nature, and allowing the world to further see the harm of US dollar hegemony. In recent years, globally, the call for establishing a more fair and reasonable international monetary system has become increasingly strong. Many countries have explored to get rid of the hegemony of the US dollar, such as reducing holdings of US bonds, promoting the diversification of foreign exchange reserve assets, exploring the use of bilateral and multilateral currency agreements to settle transactions in international trade, etc. As Turkish economist Mahefei Eilmez said: "The process of getting rid of the hegemony of the US dollar has begun, and the momentum will become more and more obvious, and the strength will become stronger and stronger."
Source丨21st Century Business Herald (Reporter: He Liuying, Editor: Li Yanxia), Xinhua News Agency, CCTV Finance, Securities Times·Data Bao, wind
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Editor of this issue Jiang Peipei Intern Lin Xiying
