Recently, the inflation data of USA was announced. Referance to this, inflation rates reached peak of the last 41 years.
At the starting of the week, United States Federal Reserve (FED) was declared that the annual inflation rate in the US accelerated to 8.5% in March of 2022, which is the highest grade since February 1981, on the other hand, monthly inflation rate is recorded as %1.2.
The expactations of economists about inflation in US were annually %8,4 and monthly 1.1.
Before the data was announced, ounce moved in the band of 1.995 dollars and rose to 1.998 dollars. At the same time, grams of gold price rose from 922 TL to 928 TL. The Dollar/TL, which was in the band of 14.68, followed a horizontal negative coarse.
The effect of fuel on increased producer prices, is clearly observed. The reason of the instability in oil prices is war. Brent oil increased 97 dollars to 135 dollars with the war. With the increase in oil prices in USA, transportation still continue being the most expensice group. In addition, the acceleration of price increases in food and commodity also increased producer inflation.
The World's Biggest Technology Companies Lost Value More Than The Total Of The Turkish Economy In Just 4 Days
The 100 most valuable tech companies listed on the NASDAQ, faced massive losses in value because of the inflation rates.The total loss of companies in 4 days exceeded 1 trillion dollars.
While the market volume was drawn to 16.9 trillion dollars, the loss in the first three months of the year reached 6.2 trillion dollars.
Market experts emphasized that rising bond revenues and concerns about the economy are making pressure on stock markets. On the other hand, the news in China does not indicate a positive future for the markets. In China, while the measures are taken with the increasing coronavirus cases, supply chain is also will be affected.
While describing the fight against inflation Thomas Barkin, Chairman of the Richmond Branch of the US Federal Reserve, gave Turkey as an example.
Thomas Barkin used these statements on the official website of Richmond Fed:
“Individuals and firms give expectations about future inflation. Firms decide on pricing and wage policy according to these expectations; Individuals form salary expectations and purchasing decisions in the context of these expectations. If the FED does its part to control inflation, expectations and price and wage increases will remain stable and constant. If he does not do his part, the opposite will happen, as in Turkey.”
While rising inflation hit the purchasing power in in United states, the endorsement of President Joe Biden has decreased in spite of the fact that the rapid recovery in the labor market and the strongest economic growth in 37 years.
Joe Biden, in his statement after the latest inflation data, expressed that they used every tool at their disposal against price increases and inflation is expected to decrease by the end of this year. Yet, the higher-than-expected inflation data increased the pressure on the FED to raise interest rates quickly.
On the other hand, FED kept the policy rate unchanged at 0-0.25 percent in its last meeting, and stated that it would be appropriate to increase the interest rates "soon".
‘‘Markets focus on the decleration of interest rates which will be given by FED.’'
Economists are expecting a 50 basis point increase in interest rates by the FED. Notwithstanding, some analysts are advocating that it is unlikely that the Fed will act "aggressively and 25 basis points increment on interest rates is presumed.
So, increment of interest rates is highly adverted: What is increment of interest rate and what are the consequences of it?
Central Banks are the main players in determining the monetary policy of countries. The Central Banks decide how much money will be printed and the interest rates on the loans given to the banks. Increment of the interest rate is made to cool the economy when it heats up. When interest rates rise, inflation declines as economic activity slows. However, high interest rates negatively affect the growth policy.
Increment of interest rate is made when there is a deficit in the balance of payments, so that there will be an inflow of foreign currency, thereby relieving the domestic market.
In this way, the currency also appreciates, and when the currency gains value, cost inflation and demand inflation are prevented due to the increase in the exchange rate. In short, inflation falls.
Eventually, it is extremely important to follow the right policies in crisis management. otherwise, the wrong decisions taken by a country like the US, which has one of the largest and most developed economies in the world, will cause great global concerns.