Economist Prof. Dr. Duran Bülbül evaluates the final interest rate decision of the year: 'The dollar will climb, prices will rise, taxes will increase...'

The Central Bank of the Republic of Turkey (TCMB) met today to hold the final Monetary Policy Committee (PPK) meeting of the year. The Central Bank had raised the policy rate to 50 percent in March and decided to keep it constant in the following 9 meetings. For the first time in 8 months, the Central Bank cut the policy rate by 250 basis points, bringing it down to 47.50 percent. Economist Prof. Dr. Duran Bülbül explained the effects of the interest rate decision to 12punto.

"MARKET INTEREST RATES WILL BE AROUND 45"

Stating that there is a difference between the interest rate decision announced by the Central Bank and the interest rate policy applied by the markets, Prof. Dr. Bülbül stated, "The government constantly says that inflation is falling, but it was keeping the interest rate constant. This was a situation that contradicted the statements of both the Central Bank and the Ministry of Finance. The fundamental problem here is that the political government is sending the message that a tight monetary policy will continue in 2025. If banks take this as an opportunity and lower it by another 2.5, the market interest rate will be around 45. If you notice, there is also a situation that works in reverse. Actually, the market interest rate should be consistently higher than the policy rate, but there is a contradictory situation. The main reason for this is that the political government still does not have sovereignty over the banks, which we call financial oligarchy. In other words, banks are pursuing a separate interest rate policy outside of the Central Bank's policy."

"A TRIPLE EXCHANGE RATE PREVAILS"

Touching on the course of the exchange rate, Prof. Dr. Bülbül warned the government by saying, "The dollar had already started to climb upwards for the last week. The dollar and the Euro will climb upwards in the coming period, and the political government inevitably wants this as well. Because we see that it has given up on suppressing it anyway. The market's pricing in terms of dollar or Euro rates is already higher than the dollar and euro rates in the free market right now. In fact, another problem is that we see the free market buying at a lower rate than the banks' dollar buying-selling rate. Both the market and the banks, as well as the political government, i.e., the Central Bank, have determined their own unique rates; we are proceeding with a triple exchange rate. The government needs to get rid of this triple structure as soon as possible. Because there are serious differences of 1 lira between the foreign exchange buying rate and the selling rate. This has created a new capital transfer. Economy is a matter of trust; if you do not provide trust, no matter how much you suppress the interest rate policy, the market will find its own way and create its own unique policy."

"PRICES WILL RISE, TAXES WILL INCREASE"

Stating that citizens will be squeezed economically in the coming period, Prof. Dr. Bülbül said, "The political government will squeeze the public significantly with a tight fiscal policy. With this policy, the political government says it will raise prices and increase taxes. We will face a process where the poor will become even poorer and retirees will head toward deep hunger far below the starvation line. 2025 will make us miss 2024. As a result of the tight fiscal policy, we are evolving toward a serious contraction in the economy, and we will evolve toward a danger where we will encounter a serious economic stagnation. Unemployment will begin, and we will go through a process where factories and businesses go bankrupt."