The rise in the U.S. Dollar-Turkish Lira exchange rate to 2.50 TL, while it was in the 2.28-2.30 TL range until two weeks ago, has led to concern.

Some media outlets are seeking to exploit this opportunity and depict this concern as panic.

There is no need to panic!

Upon examination of the variables that are causing this activity in the dollar exchange rate, it could be said that there are no elements that could threaten the stable foundations of the economy.

What is the reason behind this exchange rate activity?

Although some people and institutions try to attribute the TL’s loss of value to statements made by President Recep Tayyip Erdoğan, we all know that the factors which triggered this are something entirely different.

First of all… The impact of developments in the global economy on the dollar should not be ignored. We can see that following better-than-expected jobs data absent agriculture in the United States expectations grew that the United States will hike interest rates, and this has put wind in the dollar’s sails. As a result the dollar has gained in value against almost all currencies of developed and developing countries and not just against the TL.

Additionally… We should state that the Central Bank’s “wrong” positions have also played a significant role in the dollar’s rapid rise.

If we reflect back to Central Bank Governor Erdem Başçı’s statements about calling an early meeting of the Monetary Policy Board one or two weeks ago, it becomes very clear to see what triggered this rise in the exchange rate.

As you probably recall, Başçı had mentioned that if inflation retreated by 1 point or more, an early meeting of the Monetary Policy Board could be called to introduce a potential rate cut.

As expectations toward a rate cut were strengthened in the wake of this statement, the dollar exchange rate started rising as well.

The Central Bank issued a statement that there would be no early meeting once inflation data revealed that the retreat was 0.93 points; and this period that was full of inconsistencies took the exchange rate to the 2.50 TL level.

The situation is clear-cut. The Central Bank is largely responsible for the rapid rise of the dollar exchange rate.

CENTRAL BANKS SHOULD STRIVE TO CREATE ADVANTAGEOUS SITUATIONS FOR THEIR COUNTRIES 

Central banks in other countries use policy instruments, including the tool of forward guidance, to place their countries in a more advantageous position in the global economy.

The U.S. Federal Reserve in particular is capable of using verbal tools to steer markets without even needing to play with interest rates. It is clear to see that such attempts by central banks are carried out with the interests of their countries in mind.

Unfortunately, the policies of our Central Bank are damaging our country.

Our structure is eager when it comes to rate hikes but timid when it comes to rate cuts.

It has adopted an approach that impedes manufacturing, and is attempting to place the government in a tough position in the run-up to the elections.

Central banks in developed countries such as the United States, United Kingdom and Japan in particular work closely with their governments as they go about their business, while also maintaining their independence.

While developed countries consider this integrated structure suitable for themselves, they try to impose a very different understanding of how a central bank should operate on developing countries.

What these countries consider as a suitable central bank model for us is one that is severed from the government and is intractable…

It is a model where the government holds the fork while the Central Bank holds the knife.

This, of course, is unacceptable.

As mentioned by President Recep Tayyip Erdoğan, the Central Bank is now responsible for the activity in the dollar exchange rate.

The Central Bank will be held accountable for any undesirable situation concerning the exchange rate.