Until last year, US and Europe was desperately trying to raise inflation. I do not remember any time in Turkish history when this was the case.

Anyways, current Turkish PPI is >50% (and it will only increase in coming months.). The real interest rate in Turkey is in far negative territory compared to US and EU, where they are desperate for inflation.

>> US ... was desperately trying to raise inflation.

Well good news, they succeeded beyond their wildest dreams....

Well. 7% inflation is not insane. Look at it over the last 5 years. Average inflation is not crazy.

7% should considered unacceptable.

It is great for those with hard assets, it is TERRIBLE for the working poor.

Funny how many of the same people that claim to want to help the poor (democrats) have no problem with high inflation

Inflation is great for people in massive debt, or hold assets, and the rich

Inflation is terrible for savers, responsible people living with in their means, poor that pay cash for everything, etc etc.

Inflation is a mixed bag, you can't make blanket statements about it at all. The only thing that is always bad for working people is an excessively high real interest rate as interest can only be paid through doing actual work. Companies pass their interest payments onto consumer prices meaning the top 10% are the only net recipients of interest.

Right, but at least they said they know there is a problem and they will address it. It is not like how it is in Turkey where they said “inflation is high, let’s decrease it by printing far far more money and decreasing interest rate further”.

Have they? because last I checked they (both the Tresury, and The Fed) still insist that this inflation is transitory, supply chain issue not their monentary policy... (they investigated themselves and found they did nothing wrong)

And they are still claiming government spending trillions is not the cause, and will not create new inflation..

So no, I dont believe they have acknowledged the problem at all, nor are they really going to address is. Sure the fed says they will wind down their buying, and signaled they might raise interest rates VERY VERY VERY minimally, they are acting as if demand caused by supply chain issues is the root cause

It is not

They have taken actions in response to inflation....

I am not aware that US government is going to address inflation issues. Interest rate should at least match inflation that is 6.8% and that is not going to happen.

The Fed isn’t doing that because it’s an extreme change that would wreck the economy. Or at least, so many people believe. Why do you think you know better?

I only say FED doesn’t address inflation. Not if it is good or bad.

They obviously address inflation. Why do you think they do not?

Fed didn't increase interest rate, so they obviously didn't address inflation.

US does not have negative rates. Every other central bank would raise interest rates with inflation at the levels we’re seeing in turkey. They problem here is that Turkey is doing the opposite

The US doesn't have negative interest rates, but with inflation over 6% and rates at 1.25% that's a pretty big negative real rate...

If you look at the long-term expected inflation rate based on T-bill yields, it is not so different from before (say around 2018-19 or so). I think 6% is probably an inappropriate number to use in this comparison. Though I agree it looks like negative real rates.

https://fred.stlouisfed.org/series/T10YIE

https://fred.stlouisfed.org/series/T5YIE

(Alternatively you could suppose we’ll have inflation at x for one year and y on average for the next 9. If that’s the case I think the data above implies x=2.22% and y=4.7%, so I still think 6% is too much but maybe not totally crazy)

Ugh, x and y the wrong way round obviously.

They have negative real rates.

there is a "natural" interest rate which is roughly what a lender would expect to earn when lending to a reputable borrower. The Federal Reserve/ECB may lend at a slightly lower/higher rate than this natural rate - but going far away from it leads to a crisis as the money supply becomes distorted.

There is a big difference between lending at 0% when "natural" interest is .25% and lending at 14% when natural interest is 20%. If inflation is 18% you're effectively giving consumers 4% return on borrowed money, which means everyone will borrow as much money as they possibly can and use it to purchase goods.

> Lending at 14% when [...] inflation is 18%

In the US, inflation is nearly at 7%, while savings accounts yield around 0.05%. Doesn't that mean Americans are discouraged from keeping money in savings accounts about the same amount as Turks are?

Quite possible that the US is going down the same route Turkey is. The US has an entrenched financial system that might take an extra 6 months to enter a crises.

The current belief is that the fed will manage inflation appropriately, and that the 7% headline number will vanish in a few months. Housing increasing 20% last year is a sign that the same incentive is there, getting a mortgage at 2% and then earning a free 5% interest is too good a deal to pass up.

Yes, it is discouraging. This is a reason why fixed income investments are quite unattractive right now. But there is a lag. After many years of low inflation many people haven’t changed habits yet. We still don’t expect that much inflation.

> Doesn't that mean Americans are discouraged from keeping money in savings accounts about the same amount as Turks are?

If you believe American inflation will remain there, yes. Few do. (Also, the Fed is tightening.)

High inflation and low interest rates in Turkey means that depositors there lose more money than they would if it were in Euros.

Therefore people are discouraged from holding deposits, and encouraged to spend Lira - exacerbating inflation.