Pre-market stocks: inflation is bad enough. One country makes the situation even worse

You can quibble about when or how much interest rate hikes will rise, but pretty much all economists agree that when prices rise rapidly, higher borrowing costs can help reduce demand and lower inflation. .

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

Consider: Consumer prices in Turkey soared 21.3% in the year through November. Economists believe inflation could go even higher, with a rate of up to 30% over the next six to nine months.

Meanwhile, the Turkish lira plunges. The currency has lost more than half of its value against the US dollar since the start of the year and is on track for its worst performance since 1995. It is difficult to stop the slide because the central bank has no no significant foreign currency reserves.

And that makes life even more complicated. Turkey’s central bank on Thursday cut interest rates for the fourth month in a row, to 14% from 15%.

“President Erdogan continued to dictate to [central bank] to test his unorthodox view that lower interest rates are needed to bring inflation down, ”said Jason Tuvey of Capital Economics.

In an effort to bring some relief to the suffering workers, many of whom rushed to dump the lira against foreign currency, Erdogan on Thursday announced a nearly 50% increase in the country’s minimum wage.

“With this increase, I think we have shown our determination not to let workers be crushed by the weight of rising prices,” the president said at a press conference.

This move could give Erdogan political momentum. But higher wages are a known driver of inflation, and they could make an already dire situation worse.

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

London’s bars and restaurants are closing their doors

As the Omicron variant sweeps across the UK, pushing daily coronavirus infections to their highest level ever, UK businesses are closing their doors again – but not because of government instructions.

Rather, restaurants and other venues are deciding they have no choice but to close early for Christmas due to a flood of canceled reservations and concerns about the health of staff, reports Julia Horowitz.

Ferhat Dirik, co-owner of Mangal 2 restaurant in east London, said he decided to close a week earlier than planned due to the loss of reservations and “general uncertainty in the air”.

“It affects staff morale, and it affects us projecting any reasonable income that might justify it,” Dirik told CNN Business.

The closures are a new threat to the economy and a headache for the government, nearly two years after the start of the pandemic. They indicate that when cases are high enough, people are still willing to avoid going out, despite widespread fatigue from the pandemic.

The UK reported an all-time high of 88,376 coronavirus cases on Thursday, as public health officials warn Delta variant cases “remain relatively stable in numbers” while Omicron “is growing very rapidly.” In London, it is already the dominant variety.

It is a scene that could soon be played out in the big cities of the world.

The housing market

Home improvement retail giant Lowe’s (MEUGLER) posted a disappointing sales outlook earlier this week. And house builder Lennar (LEN) reported results that missed expectations. The company cited supply chain issues and higher lumber costs.

But before you start screaming from the rooftops of the arguably overpriced house you live in as the housing bubble bursts, consider this: The government announced Thursday morning that housing starts and building permits in November both had increased more than expected from October levels.

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

“Demand is obviously not a problem, as evidenced by recent increases in sales, [mortgage] homebuilders’ applications and sentiment, ”Jefferies economists said. “On the contrary, Omicron should cement housing demand, demonstrating that the pandemic is far from over. “


Darden Restaurants (DRI) and Winnebago (WGO) publish the results before the US markets open.
Coming next week: income from Nike (NKE), Rite Help (RAD), Micron (MICR) and General Mills (GIS). The US stock exchanges are closed on Friday.

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