Cevdet Akçay brought it to the agenda: What is an oxymoron?

Following the inflation meeting held by the Central Bank of the Republic of Turkey (TCMB), the remarks made by TCMB Deputy Governor Cevdet Akçay during the Q&A session became a trending topic on social media.

Citizens began searching for the meaning of Akçay's use of the term "oxymoron." So, what is an oxymoron? Here are the details...

The word oxymoron, which comes from Greek, is defined as the use of contradictory words together. When used as an economic concept, an oxymoron carries a meaning that highlights the contradictions and complexity of an economic system.

The concept of an oxymoron can also be associated with "growth stagnation."

CEVDET AKÇAY BROUGHT IT TO THE AGENDA

Cevdet Akçay's "oxymoron" remark at the Central Bank of the Republic of Turkey's (TCMB) Inflation Report meeting overshadowed the rest of the inflation meeting.

Taking the floor after the meeting, Akçay made striking statements, saying, "There is a question that hasn't been asked. If you like, I will ask and answer it myself: Why didn't you revise the 36 percent target upward?"

Akçay used the following expressions in his speech:

"When the process is not understood correctly, questions arise such as why the 36 percent inflation forecast was not revised upward. In the system we are currently working in, the link between the weighted average funding cost and deposit interest rates had been broken, the link between the policy rate and inflation had been broken, and the link between interest rates and exchange rates had been broken.

We have been re-establishing these for seven months. These links will be re-established. Data will accumulate. You will use the field data, you will do the modeling. Only after that will you feel the need to go from 36 to 38. Those who know modeling will understand me very well that this is very difficult and even close to impossible.

Rather than changing the 36 target, it is much more meaningful to implement measures that will constantly bring us closer to that target. Otherwise, you would be attributing an importance to your work that does not exist. This normalization process will actually provide a suitable environment for those working in modeling as data accumulates and links are re-established. We are not even at that point yet.

The 36 target is ambitious; but a central bank that sets an unambitious target is, in my opinion, an oxymoron. An ambitious but accessible target is much better at lowering and correcting inflation expectations than an unambitious and easily reachable target. Therefore, we strongly believe in the correctness of what we are doing"

WHAT HAD HAPPENED?

President and AKP Chairman Recep Tayyip Erdoğan had said "Interest is the cause, inflation is the result" at his party's group meeting in 2021. Following this statement by Erdoğan, interest rates were cut by 100 basis points at the Monetary Policy Committee (PPK) meeting held in November 2021. With the lowering of interest rates, inflation continued to rise.

After the May 28 elections, Mehmet Şimşek was appointed as Minister of Treasury and Finance and Hafize Gaye Erkan as Governor of the TCMB. After Şimşek announced that "a transition to rational policies has been made," the TCMB raised the interest rate from 8.5 percent to 45 percent in eight months.

Akçay's speech was interpreted as an attempt to exit the interest-inflation vortex resulting from the "Interest is the cause, inflation is the result" policy.