Addendum to latest Hurriyet column: Box of chocolates from Central Bank
Not much to add this time around. There were quite a few earlier posts at the blog that complemented the article, such as the Denizli conference, foreign currency open positions and the like, but all of them were hyperlinked at the article.
But one important point I could not make over at the column: I am not saying I am convinced by all of the Central Bank’s arguments in the Inflation Report. For example, I agree with the Bank’s point in taking into account productivity when looking at wages or labor costs; after all, real wage is equal to marginal product of labor (not the average, but that is a small distinction for our purposes). But let’s not forget why we are looking at wages: For inflationary pressures, and I have yet to be convinced why we would need to take into consideration productivity in that regard.
And I still have mixed feeling on all this overheating debate. But I definitely prefer to see the analytical arguments by the Bank rather than some bold statements without any proof. BTW, I really loved the credit default swaps-unemployment paper; I have no objections to the findings there…
Finally, although I criticized the Central Bank’s showing the required reserve ratio, or RRR, decreases for increasing maturity of deposits, rather than calming lira pressures, I understand the dilemma they are in: They adamantly say that they are not targeting the level of the lira (which is sort of true, as they care about volatility and amount of depreciation, including its pace), but still I believe they could have phrased it so that they are responding to the volatility. Nothing useful came out of the statement anyway: Skeptics like me thought they were taken for an idiot, whereas others not really following up developments in detail got confused…
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