Cevdet Akçay addresses the interest rate-inflation vortex: 'We are trying to re-establish them'

Central Bank Governor Fatih Karahan held an information meeting at the Bank's Headquarters to present this year's first Inflation Report, while Deputy Governors Hatice Karahan and Osman Cevdet Akçay answered some of the questions.

Regarding a question about deposit interest rates, Akçay stated that the set of regulations they are trying to simplify was actually a system established to nurture and boost the Currency-Protected Deposit (KKM) scheme, which they are now trying to exit.

Akçay said, "We have been re-establishing the broken links for seven months. These ties will be re-established."

A CONFESSION-LIKE STATEMENT

Responding to a question about the 36 percent year-end inflation target, Akçay said, "In the system we are currently working in, the link between the weighted average funding cost and deposit interest rates has been broken, the link between the policy rate and inflation has been broken, and the link between interest rates and exchange rates has been broken."

Akçay continued as follows:

"We have been re-establishing the broken links for seven months. These ties will be re-established. Data will accumulate. You will use the field data, you will do the modeling. From there, you will feel the need to move from 36 to 38; it is very difficult. Those who know modeling will understand me very well that this is very difficult and even close to impossible."

"AN AMBITIOUS BUT ATTAINABLE TARGET"

Describing the 36 percent target as "an ambitious but attainable target," Akçay said, "It is much better than an unambitious and easily reachable target for bringing down inflation and correcting inflation expectations. We firmly believe in the correctness of what we are doing."