Oil prices alone are not enough for optimism in economy

The positive atmosphere created by the low course of world oil prices did not last long. Following positive data about the U.S. economy, the possibility of the Fed moving forward interest rate increases has shattered the optimism brought by oil prices.

As a matter of fact, due to the new climate, the view of foreign funds for Turkey had turned positive because of the expectation that both the current account deficit and inflation problems would ease.   

When the possibility of Fed moving forward the interest rate increase emerged, the euro and all national currencies started losing value against the dollar. In the first day of the week, the Turkish Lira started climbing again against the dollar and the possibility of it to reach 2.30 occurred. Upon this, the Central Bank stepped in and decided to re-increase the sale of foreign currency to the market, as well as restricting the amount of money released. 

Upon the downward trend in the dollar exchange rate, the Central Bank had decreased its daily foreign currency sale amount from $40 million at the beginning of December to $20 million. However, upon recent developments, the Central Bank, after less than 10 days, had to announce that it would again sell $40 million daily. The Central Bank cited “the need to take action against the mobility in the foreign exchange rates” as the reason for this decision.

The Central Bank’s move was not limited to this. On Dec. 8, it provided a resource of 3 billion liras for banks in return for 5 billion lira repo to the market. Thus the Central Bank compacted the lira’s liquidity in the markets by 2 billion liras. The Central Bank encouraged the banking system to turn to loaning through the overnight loaning interest rate, which is higher...