Prof. Dr. Hakan Kara criticizes Central Bank's expectation management

Bilkent University faculty member and former chief economist of the Central Bank of the Republic of Turkey (TCMB), Prof. Dr. Ali Hakan Kara, drew attention to the difficulties faced by economic management in controlling market expectations. In his statement, Kara evaluated the current policies of the TCMB using a real-life analogy.

In a statement made via his social media account, Prof. Dr. Kara noted that moving in the right direction alone is not sufficient to achieve the goal. Stating that the phrase "being on the right track" is not enough to convince the public in terms of expectation management, Kara used the following analogy:

“The economic management's rhetoric of 'we haven't reached the inflation target, but the direction is right' does not work well in managing expectations. Let's say I'm going to the airport; there are 40 minutes left until the flight takes off, but the navigator shows the arrival time as 50 minutes. In this case, does saying 'I'm going, my direction is right' have any meaning?”

Pointing to the importance of expectation management, which is frequently brought up by economists, Kara implied that merely defending the direction of policies weakens public belief as long as it fails to produce results.

Kara's remarks have led to the questioning of monetary policy not only in terms of direction but also in terms of timing and effectiveness, amid the current environment where the gap between the TCMB's inflation targets and real outcomes is being debated.