Economist Prof. Dr. Duran Bülbül: Interest rate hikes alone are not a solution; this trend will end in stagflation

Gizem Yaralı-12punto

The Central Bank has announced the interest rate decision that the markets were eagerly awaiting. The CBRT Monetary Policy Committee raised the policy rate by 500 basis points to 40 percent, exceeding the market's average expectation.

Following the CBRT's interest rate decision, all eyes turned to economists. Economist Prof. Dr. Duran Bülbül evaluated the Central Bank's decision to raise the policy rate to 40 percent for 12punto.com.tr.

Duran Bülbül's assessments are as follows:

The Central Bank's interest rate hikes continue. Although interest rate hikes are an important argument for balancing the economy and suppressing foreign exchange, they are not sufficient on their own. Our country being on the grey list is a significant obstacle to the entry of hot money into our country.

If the purpose of the interest rate hike is to attract foreign capital and lower the exchange rate, this situation does not depend solely on interest rates. The country needs to be reliable in both legal and economic terms. Therefore, increasing interest rates alone is not enough.

Since interest rate hikes will create difficulties in accessing funds, they may reduce investments and lead to stagnation and unemployment. Inflation is already present as well. The result is stagflation.