Economist Prof. Dr. Duran Bülbül: Stability in the economy cannot be achieved solely by raising interest rates

The Central Bank's highly anticipated interest rate decision has been announced. The Monetary Policy Committee raised the policy rate by 500 basis points to 35 percent. Economist Duran Bülbül shared his assessments with 12punto.com.tr following the interest rate decision.

The political administration does not have a program regarding raising interest rates and lowering inflation. However, I can say that the 2024 budget is a budget that will increase the current inflation by one hundred percent. Stability in the economy cannot be achieved solely by raising interest rates. There is a need for a selective program in the economy regarding agriculture, investments, industrialization, and production; the political administration needs to put this forward very urgently. Right now, they are just saving the day, and tomorrow they won't even be able to do that. After a while, this will not be enough either. What they should have done was to raise the policy rate from 9 percent to 40 percent while market interest rates were at 40 percent. At that time, it would have been possible to get rid of the pressure on the exchange rate in the short term.

THE EXPECTED HAPPENED

The expectation survey for the Central Bank of the Republic of Turkey's (TCMB) Monetary Policy Committee (PPK) meeting was concluded with the participation of 19 economists. The median of the economists' expectations regarding the change in the policy rate was an increase of 500 basis points. According to the survey results, the policy rate expectations of economists who predicted an increase between 250 and 500 basis points ranged between 32.50 percent and 35.00 percent. And as expected, the interest rate was raised to 35 percent.

THEY HAVE NO STRATEGY

However, the fundamental problem is this; the Central Bank has no interest rate strategy.

They did not want to waste the positive effect that an interest rate hike would create in this environment by making a high interest rate hike today as well.

News Source: 12punto