On Wednesday, Turkish President Recep Tayyip Erdogan expressed a major change in his fiscal policy by announcing support for his new economic team’s decision to dramatically raise interest rates to fight runaway inflation.
Erdogan has consistently opposed increasing borrowing costs and pushing former central bankers to fight inflation with low interest rates, while traditional economists say higher interest rates help lower prices by lowering demand and raising the cost of doing business.
Erdogan indicated clearly on Wednesday that he now supports raising interest rates. “We will reduce inflation to single digits with the support of tight monetary policy… We have no doubt that we will achieve our goals,” he said in a televised speech announcing Turkey’s new economic program in the medium term.
Analysts believe Erdogan’s past policies helped spark a currency crisis that sent annual inflation to 85 percent last year.
But he appointed a group of Wall Street-trained experts to direct the economy after he almost lost the elections last May due to the difficult economic crisis in Turkey.
Since then, the central bank has raised the interest rate almost three times what it was, to 25%.
The Turkish economy.. Has Erdogan really retreated from his “unconventional” policies?
The “language of the economy” still hangs over the stage that followed the victory of the Turkish President, Recep Tayyip Erdogan, for a third presidential term, and a series of decisions taken by the newly appointed economic team open the door to questions about what policy he is moving through, and whether it constitutes a coup against ” The unique model”, which was applied after 2021.
Analysts believe that the Bank will need to raise the interest rate much higher at the next meeting on September 21, because inflation has returned to nearly 60 percent.
Some analysts felt that the central bank was refraining from raising the main interest rate faster for fear of angering Erdogan, knowing that the Turkish president scared the market when he fired a central bank governor who tried to raise interest rates in late 2020 and early 2021.
This happened after he fired two others who objected to his unorthodox approach.
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2023-09-06 14:11:33
