Two years ago, the interest statements of President Erdogan, who made Turkey pay a heavy price with the economic model he had put into practice by saying, “Among our friends with whom we walked, should not be apologetic.
While the thesis of President and AKP Chairman Recep Tayyip Erdoğan, who introduced Turkey to 2022 with a new economic model by saying, “My field is economics, I am an economist”, “interest is the cause, inflation is the result” made Turkey pay a heavy price, today’s record interest rate increase Erdogan He reiterated what he had said in the past.
At that time, Erdogan said to the critics of economists that “interest is the cause, and inflation is the result” at that time, “As long as I am in this office, I will continue my fight against interest until the end. What is clear about this? What’s going on with you, with me, now that you’re in the middle?” he had replied.
NOT AN ORDINARY PROVISION
As the criticism continued, Erdogan once again gave religious references and said:
“What is it, sir? We were lowering interest rates. Don’t expect anything else from me. As a Muslim, I will continue to do whatever is required. Alhamdulillah we are on the right track. Because the rule that interest makes the rich richer and the poor poorer is not an ordinary rule for us.”
Within the framework of the low interest policy, which caused a sharp loss in TL and a rapid increase in inflation in the last two years, the CBRT gradually reduced interest rates by 1,000 basis points, and reduced it by 50 basis points to 8.5 percent in order to support the recovery after the earthquakes in February.
With its decision in June 2023, the CBRT increased interest rates for the first time since March 2021.
Speaking to reporters on the plane while returning to Turkey from Azerbaijan in June, Erdogan, when asked about the economy, said: “As for the current thinking of our Minister of Treasury and Finance, we of course accepted him to take the steps he will take here quickly and easily together with the Central Bank, we said ‘good luck’. ” he had replied.
HE SAID ‘YOU KNOW MY FIGHT WITH INTEREST’
The official annual consumer inflation was 19.25 percent in August 2021, before the CBRT started interest rate cuts. The CBRT’s policy rate was 19 percent. In November, when Erdoğan announced the new economy model, inflation was 21.31 percent, while the policy rate was reduced to 15 percent. In the period when the model was applied, official inflation saw the new peak of the 21-year AKP governments period.
Even though the Central Bank lowered the policy rate with Erdogan’s instruction, 20-year peak levels were seen in deposit and loan rates.
On January 29, 2022, “You know my struggle with interest, we will and will lower interest rates. Know that inflation will also decrease, it will decrease even more. The exchange rate stabilizes, inflation decreases, and expensiveness disappears. Erdogan said, “All of these are temporary,” and when he could not reduce inflation during the year, he dropped his promises to 2023. He ended the year 2022 with the words “Everybody should make their calculations according to 20 percent inflation in 2023”. However, this calculation did not hold up in 2023, and the rise in inflation accelerated.
In the pre-election period, the government opened the credit taps at the expense of inflation and the current account deficit, but at this point, while many citizens could not access credit, those who could, faced interest rates above 50 percent. While using loans and buying a house and car is now a dream for most of the society, deposit interests have exceeded 40 percent levels. Erdogan lost ‘in reality’ in his battle with interest rates.
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