Economist Prof. Dr. Duran Bülbül: 'The Central Bank's interest rate decision will negatively affect inflation!'

Hazal Güven - 12punto.com.tr 

The Central Bank of the Republic of Türkiye (TCMB) announced its second interest rate decision of the year at the March Monetary Policy Committee (PPK) meeting. In line with expectations, the policy rate was lowered by 250 basis points to 42.5 percent. 

Evaluating the announced interest rate decision, Economist Prof. Dr. Duran Bülbül said, "The picture that the political power claimed to have put effort into, made the public pay the financial cost for, and claimed to have 'fixed the economy' by bringing it to a certain point, has been spoiled with this decision." 

Stating that "inflation data will rise even further in the coming period," Prof. Dr. Bülbül listed his warnings one by one. 

How should we interpret the Central Bank's interest rate decision?  

"With the decision it has taken, the Central Bank of the Republic of Türkiye (TCMB) is heading towards a negative interest rate. The Central Bank is announcing the policy rate as 42.5 percent, but banks will not offer this 42.5 percent policy rate. They will offer it at a lower rate. This means the following: the picture that the political power claimed to have put effort into, made the public pay the financial cost for, and claimed to have 'fixed the economy' by bringing it to a certain point, has been spoiled with this decision. It has also squandered the self-sacrifice of the entire public. In other words, when we look at this process seriously, since it has fallen into a negative interest rate with the available data, the outflow of hot money, in particular, will begin again. This is a significant problem. 

‘THE CENTRAL BANK HAS REFUTED ITS OWN REPORT’

Secondly, there is a fundamental problem regarding Türkiye's debt burden. This time, foreign exchange will also climb upwards. We know that the dollar is currently around 36.44. With today's values, the dollar should be around 42 TL. This is because foreign exchange is constantly being suppressed. One of the most important reasons for this suppression is the effort to show Türkiye's external debt burden as low. 

Türkiye has an external debt of approximately 550 billion dollars. If the exchange rate had reached 42, Türkiye's debt burden would currently be about 3 trillion more. That is why the political power is suppressing foreign exchange and trying to show it as low. There is a serious price to pay for trying to show debts as low. That price is this: the market is financing the 3 trillion TL of hidden debt burden through our people and the market. How is it financing it? It is financing it through prices. It is financing it through wages, consumption, food, gasoline, diesel, and fuel. 

In my opinion, Türkiye's annual inflation is currently over 90 percent. In fact, one of the most fundamental problems here is this: they revised the Medium-Term Program, the 2025 inflation forecast stated by the Central Bank, and the foreign exchange and inflation forecasts in the 2025 budget after 2 months. This means that the annual inflation and foreign exchange data will not hold. After a 2-month interval, the Central Bank has revised its own report. Or rather, it has refuted it. If you refute the annual inflation data you created after 2 months, and if you refute the annual foreign exchange data after 2 months, it means there is a serious problem here. 

‘THE INDEPENDENCE OF A COUNTRY WITH HIGH DEBT BECOMES NOTHING’

If you are giving an interest rate of 42.5 in a country where inflation is 90 percent, you are giving a 47.5 percent minus, that is, a negative interest rate. With this 47.5 percent negative interest rate, you cannot make investments in this country, hot money will not come, and direct investments will not be made in this country. The political power must get rid of the exchange rate-foreign currency case as soon as possible and put a production economy, development economy, and agricultural economy program in front of it. It needs to put a program that will compete in science, technology, agriculture, and industry back on the table. As long as it does not do this, Türkiye only thinks it is saving itself. 

There is a serious stagnation in the market. We are facing a serious stagflation brought about by this stagnation. This stagnation will bring with it a serious contraction in the coming period. Along with the contraction, shrinking will come. As firms shrink, public expenditures will shrink. The shrinking of public expenditures will shrink the national income. This will increase poverty. All of these will bring social and political problems with them. Türkiye urgently needs a national development model, a national investment model, a national industrialization and agricultural model. Türkiye must get rid of imperial rhetoric, put Mustafa Kemal Atatürk's national economy model at the center, and return to a developmentalist, public-oriented economy immediately. 

The end of countries that finance debt with debt is bankruptcy. A country with a lot of debt has poor resilience, poor defense, and its independence becomes nothing."

‘FOOD IS EXPECTED TO BECOME CHEAPER DURING HOLY DAYS’ 

How will the announced interest rate decision affect inflation? Will there be a drop in prices? 

"Inflation data will rise even further in the coming period. The Central Bank's decision will negatively affect inflation data. Both the exchange rate will increase and inflation will increase. We are currently in a blessed month. It is expected that food will become cheaper during important holy days. Unfortunately, because trade is conducted even over people's religious values in our country, we see that all prices are increasing significantly. In other words, we are experiencing a commercial immorality here. If people's religious values are not even respected and prices are increasing significantly even in a very important month, this needs to be questioned morally and socially."