Mahfi Eğilmez shares tactic to lower the dollar: 'If you do this...'

Economist Mahfi Eğilmez appeared on journalist Mirgün Cabas's program "Şunu Bir Anlat" (Explain This).

Commenting on the course of the economy, Eğilmez argued that inflation would not fall solely through interest rate hikes by the Central Bank and that structural reforms are necessary.

Here are the highlights from Eğilmez's striking statements regarding interest rates, foreign currency, and inflation:

"You cannot get out of this situation just by raising interest rates. I have a definition: if the interest rate is set incorrectly, it can sink the economy. If it is set correctly, it cannot save the economy on its own. You absolutely must add other things to it. You can save the US economy with interest rates alone because it does not need major structural reforms. It doesn't need reforms in law, democracy, or education.

"WE ARE HOLDING THE RATE"

We have a great need for these. Without implementing them, we cannot get out of this situation with interest rates alone. For example, we are currently holding the exchange rate. They are applying pressure on the rate; what are they doing? They are selling. They are selling foreign currency, though they are buying now. It has reversed, but they will sell again. They are trying to keep the rate at 32 or 33. Why are they trying to hold it? So that the GDP appears higher...

Because when we calculate GDP, we add up every good at the current market price, which gives us the total GDP. We divide that by the annual average exchange rate.

HOW DOES THE RATE FALL?

The lower the exchange rate, the higher the result. We are creating pressure to prevent these.

This, of course, results in inflation appearing slightly lower. Inflation will not fall below 50-55. The IMF says 45, but I think that is a bit optimistic; I say around 50-52. If we let the rate go, where would we end up? Of course, if we raised interest rates, the Turkish Lira would gain value. We are at 50 today; if we raise it to 80, the rate would most likely fall to 25."

News Source: 12punto