Inflation is bad enough. One country makes it worse – BoilingNews

You can argue about the timing or size of interest rate hikes, but just about every economist agrees that when prices rise rapidly, higher borrowing costs can help reduce demand and inflation.

But not in Turkey, where President Recep Tayyip Erdogan has repeatedly pressured the country’s not-so-independent central bank to cut interest rates despite rising inflation. And that is exactly what the bank is doing, with potentially disastrous consequences.

Consider: consumer prices in Turkey rose 21.3% in the period to November. Economists think inflation could be even higher, with a rise of up to 30% possible in the next six to nine months.

Meanwhile, the Turkish lira is plummeting. The currency has lost more than half its value against the US dollar so far this year and is heading for its worst performance since 1995. The decline is difficult to stop because the central bank does not have significant foreign exchange reserves.

And it makes life even harder on itself. On Thursday, the Turkish central bank cut interest rates for the fourth month in a row, from 15% to 14%.

“President Erdogan has continued to dictate to the heavily purged” [central bank] to test his unorthodox view that lower interest rates are necessary to curb inflation,” said Jason Tuvey of Capital Economics.

In an effort to provide some relief to ailing workers, many of whom are rushing to dump the lira for foreign exchange, Erdogan announced a nearly 50% increase in the country’s minimum wage on Thursday.

“I think with this increase we have shown our determination not to allow workers to be crushed under the weight of rising prices,” the president said at a news conference.

The move could give Erdogan a political boost. But higher wages are a known cause of inflation, and they could exacerbate an already dire situation.

Other countries continue to take a more orthodox approach. Russia raised interest rates by 1 percentage point on Friday to counter rising prices.

London bars and restaurants are closing themselves

As the Omicron variant races through the UK, pushing daily coronavirus infections to all-time highs, UK businesses are closing their doors again – but not because of government instructions.

Restaurants and other venues instead decide they have no choice but to close early for Christmas due to a spate of canceled reservations and staff health concerns, reports Julia Horowitz.

Ferhat Dirik, the co-owner of the Mangal 2 restaurant in east London, said it had closed a week ahead of schedule due to lost bookings and the “general uncertainty in the air”.

“It affects staff morale and it affects us if we expect a reasonable income that could justify it,” Dirik told CNN Business.

The closures pose a new threat to the economy and a headache for the government, nearly two years after the pandemic. They indicate that when the cases are high enough, people are still willing not to go outside, despite widespread pandemic fatigue.

The United Kingdom reported a record high of 88,376 coronavirus cases on Thursday, as public health officials warn that cases of the Delta variant “remain relatively stable in numbers” while Omicron is “increasing very rapidly”. In London it is already the dominant variety.

It’s a scene that could soon be set in major cities around the world.

the housing market

Is the housing market finally losing momentum?

Retail giant for home improvement lowe’s (LOW) issued a disappointing sales outlook earlier this week. And home builder Lennar (LEN) reported results that missed predictions. The company cited supply chain problems and increased wood costs.

But before you start screaming from the rooftops of the arguably overpriced house you live in that the housing bubble is bursting, consider this: The government reported Thursday morning that housing starts and building permits in November both rose more than expected from October level.

According to my CNN Business colleague Paul R. La Monica, that suggests that consumers still want to buy new homes and live the proverbial American dream in the suburbs, especially since Covid-19 is still a major concern.

“Demand is clearly not a problem, as evidenced by the recent increases in sales, [mortgage] applications and the sentiment of homebuilders,” said Jefferies economists. “If anything, Omicron should bolster housing demand by showing that the pandemic is far from over.”

Next one

Dardena Restaurants (DRI) and Winnebago (WHO) report results before US markets open.

Next week: Income from Nike (BY), Rite help (RAD), Micron (MICR) and General Mills (GIS). The US stock markets are closed on Friday.


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