Despite the record inflation, the Central Bank cut the interest rate again eight months later, reducing the policy rate from 14 percent to 13 percent.
SHOCKED MARKETS
According to the analysis in the Financial Times, this situation is “Erdogan created a ‘shock effect’ in the markets with a 100 basis point interest rate cut despite the 80 percent inflation rate to encourage growth before the 2023 general elections.” summed up in his words.
For the decision in question in the analysis, “Surprisingly, it was announced as 13 percent, while experts expected the rate to remain constant at 14 percent.” statements were included.
The FT considered that the reason for the Turkish lira’s depreciation of more than 25 percent against the dollar in 2022 was that the previous decisions of the Central Bank smuggled foreign investors from Turkey.
“INFLATION ERDOĞAN’S BIGGEST COMPETITOR”
In the analysis, where it was emphasized that Turkey’s other central banks took decisions to the contrary, it was underlined that inflation, which made even buying fruit a luxury in the country, was Erdogan’s biggest rival in the election.
It was also stated in the news that there is widespread unhappiness among the people in Turkey and that support for Erdoğan has fallen to the lowest levels.
“INSTRUCTION MAY HAVE ARRIVED”
The news also included the views of Ceyhun Elgin, a professor of economics from Boğaziçi University. elgin, “Amid signs that growth might slow down, instructions for a discount may have come. The goal may be to move things forward, for better or worse, until the election.” said.
Cristian Maggio, head of emerging markets at Canada-based TD Securities, told the FT. “With this decision, the Central Bank sets aside inflation targeting and sets out its goal of supporting growth. However, this move, combined with 80 percent inflation, amounts to only ‘catastrophic’. said.
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