To put it colloquially what is nowadays “in the air” goes like this: interest rates can be kept as low as possible if only somebody so wishes. Theoretically, this either implies the rate of interest is always fully exogenous –and this is the good part- or it shouldn’t even exist –this is the weird part.
For instance, there may be times, such as in 1933 Berlin, when the watchdog might claim that rates shouldn’t exceed a certain upper bound, and banks would follow suit. This can only happen of course if all other prices are also kept quasi-constant.
Here the claim is rather different. Because people can’t come up with other ideas, the only mechanism growth is purported to be restored is via the credit channel, to which public expenditures might be appended as an addendum. And the only growth engines people can imagine are construction and automotive. These are reminiscent of 1930s; there is nothing new in them.
Personal and vehicle loan rates are still high, which suggests the CBRT policy rate will be cut further so they fall too. Well, I don’t know much but possibly this is the best way to render the Lira vulnerable to shocks even more than it already is.
The main conjecture, without considering its consequences, lie in the loans-to-deposits graphic. Loan growth has fallen so drastically that it is even below deposit growth. Going hand in hand with deposits could be accepted because overseas funding was scarce and expensive last year, so the conjecture goes, but falling behind deposits can’t be accepted.
True, but there is also the fact that demand fell drastically first, and then loan growth nosedived, not vice versa. This is the causality chain in this economy, not the other way around.