Şeref Oğuz reveals the frightening scenario for the Turkish economy

Economic writer Şeref Oğuz commented on the Monetary Policy Committee's decision to continue its current trend and raise interest rates to 35 percent.

Oğuz painted a grim picture, stating, "Restrictions will begin to be placed on credit cards and limits. This will affect the housing and vehicle markets. We are heading toward a period of greater economic contraction."

The full text of Şeref Oğuz's article:

The CBRT raised interest rates by 500 basis points. Following the Palestine-Israel conflict, a smaller rate hike had been expected. My expectation, however, was in line with the market: 500 basis points. The economic administration did not hesitate to use the interest rate card to attract capital. In a way, it said, "We are constantly raising interest rates, please come now."

But despite this, foreign capital is not coming. They say, "Let's wait a little longer." They are hesitant, thinking, "You are all well and good, but other than interest rate hikes, everything is just talk; you have no concrete actions." In short, they are waiting for tangible results, just like those in the domestic market. Now the question is: if the Naci Ağbal syndrome were resolved, would they come?

THE CENTRAL BANK WILL INTRODUCE ADDITIONAL MEASURES

I don't think they would come anyway. Because while foreign investors look at potential gains on one hand, they want to be sure they can get their investments back on the other. They do not want to experience the previous minister's "nasty surprises" again. Even if a clause stating "the Central Bank governor cannot be dismissed" were added to the Constitution, they say it "is not enough to build trust."

We look at the interest rate decision text: "Monetary tightening will be strengthened gradually as needed and in a timely manner until a significant improvement in the inflation outlook is achieved." One implication of this is that there is still a spending trend fueling inflation. Clearly, the Central Bank has lost hope in external funding.

TWO QUESTIONS, TWO ANSWERS

What will happen now?

Restrictions will begin to be placed on credit cards and limits. Commercial loan interest rates will rise. This will affect the housing and vehicle markets. We are heading toward a period of greater economic contraction.

Will there be sharp increases in deposit interest rates?

Deposit interest rates have started to become costly. Banks will begin to turn to alternative options. An increase in deposit interest rates at public banks may be seen, but private banks will likely opt for more limited increases. If you lower interest rates this much out of heterodox stubbornness, you will face problems when raising them as well.

The rumor mill is working. How? It is being whispered that the President summoned Şimşek and asked why inflation is not falling even though interest rates have been raised... We are also hearing talk of "Will Şimşek resign?"

Of course, such discourse always exists. Because the Ağbal syndrome is still in people's memories. No one invests in a country where inflation and interest rates do not fall. Let us not forget this reality. However, those who manage the economy, and whoever is fueling them, should realize that their statements are no longer credible. If you provide so much misinformation, spread empty promises, and fail to keep your word over time, no one will be guided by your words, even if you say, "Sir, I am the Central Bank. I will provide verbal guidance." Because there is no trust in you, and you have a track record of managing interest rates for years as if they were "divine decree" (nas).

What needs to be done is this: Instead of the Central Bank officials fueling each other with Pollyanna-like optimism, they should go out into the market and measure their own credibility... Instead of communicating through the sycophants and cronies surrounding them, they should make contact with real market makers.

When I say market makers, they can get the most solid information from people at the hunger threshold and the millions at the poverty line. From where? For example, from the bazaars and markets, retirees' coffee houses, and family gatherings of housewives... Not from five cronies getting together and repeating words that even they do not believe in...