• April 2020 (1)
  • March 2020 (6)
  • February 2020 (3)
  • January 2020 (4)
  • December 2019 (2)
  • November 2019 (3)
  • October 2019 (3)
  • September 2019 (2)
  • August 2019 (3)
  • July 2019 (2)
  • June 2019 (4)
  • May 2019 (6)

    Inflation, exports and FED President Bernanke

    Fatih Özatay, PhD04 September 2012 - Okunma Sayısı: 818

    From an academic perspective, Bernanke’s remarks on monetary policy were critical, but he didn’t say anything new from the perspective of financial markets.

    Goodish and baddish developments on the inflation front: the baddish one is that consumer prices increased beyond expectations in August, with annual CPI at 8.9 percent. The goodish news is about the l index that excludes certain goods and services in calculations in order to give a better picture of inflationary trends. Since February, the headline inflation measured on the basis of annual changes in the l index has been rigid at 7.8 percent. In August, the first sign of the breaking of the rigidity were seen: annual headline inflation rate decreased to 7.2 percent. The Central Bank alike many economists expect a significant fall in inflation in the coming months. Let’s wait and see!

    Exports are weak

    On Saturday, I mentioned in brief the export figures for July, announced by the TURKSTAT. Turkey’s export performance has been weak for some time now when the temporary gold-exports were excluded. Following the release of TURKSTAT figures, the Turkish Exporters’ Assembly released export figures for August that don’t involve gold exports. According to this, exports decreased by 4.6 percent year-on-year which is a bad sign for third quarter’s growth performance.

    On Friday, US Federal Reserve (FED) president Bernanke delivered the awaited speech. From an academic perspective, Bernanke’s remarks on monetary policy were critical, but he didn’t say anything new from the perspective of financial markets. He stressed that unemployment rate in the US was significantly beyond the reasonable rate of 6 percent and that this was unacceptable. He emphasized that new measures to lower unemployment rate might be introduced, if needed. His emphasis on unemployment and relevant measures is not new; similar remarks were heard after the previous FED meeting, too. Let me stress another thing: the unemployment rate Bernanke complained about is 8.3 percent; while Turkey is happy that unemployment rate “deceased” to 9 percent.

    Bernanke stated three reasons for volume of economic activities standing below expectations despite the active use of monetary policy. First is that, the housing sector did not recover. Second, fiscal policy did not contribute to the recovery process and uncertainties about the lifting of debt ceiling continued, affecting economic processes negatively. Third, he stated, was the unfavorable developments in Europe.

    The latter two are legit; but the first one sounds like “the volume of economic activity is low because the volume of economic activity is low.” Given that neither someone at his expertise nor his technical team would make such a simple mistake, he must have made this statement for a purpose. This might imply that if the third quantitative easing is going to be introduced, FED plans to design it to cover the purchase of financial assets of the housing sector.

    This commentary was published in Radikal daily on 04.09.2012