The Turkish president, known for his religious conservatism, last December justified his choice to keep rates lower in order to limit the usury prohibited by the Muslim religion: “We are lowering the rates. thing on my part. As a Muslim, I will continue to do what my religion commands me to do.”
But at the same time, the Turkish president is setting up mechanisms allowing future buyers to take out mortgages with more advantageous rates.
The objective remains above all economic growth.
“It’s already too late for Turkey”
According to the Turkish economist and financial analyst Selçuk Geçer, central banks have two important weapons for price stability: the key rate and their reserves. “If these weapons are not used in a timely and effective manner, inflation and rising prices spiral out of control.”
In fact, Turkey has both exhausted these weapons and caused inflation to spiral due to its poor monetary policy implemented since 2015, according to the economist.
“The bad policy depleted reserves and caused huge budget deficits. The central bank thought it could maintain the exchange rate by selling reserves. But it didn’t work,” says Selçuk Geçer.
For the Turkish economist, it is already too late to raise interest rates to fight inflation:
“Today, the weapon of interest rates is already unusable. To control inflation of 80% and the exchange rate, key rates must be at least 100%. Such an increase is almost impossible. , that would lock in the whole market.”
“It would be political suicide for the Turkish President Erdogan”
“On the other hand, with the elections approaching, such an increase would mean political suicide for Turkish President Erdogan,” Selçuk Geçer added. According to him, bad monetary policies have put Turkey in a bind.
Macroeconomic balances are deteriorating a little more each day and the economic depression is deepening. “Currency collapse, hyperinflation and bankruptcies are on our doorstep,” Selçuk Geçer said.
This inflation, which is even higher in the country’s major cities, forced the government to announce on Friday a new 25% increase in the minimum wage – after that of 50% implemented on January 1 – at the risk of further accelerating the increase. consumer prices in the coming months.
Controlling inflation between now and the next election will undoubtedly be the biggest challenge for the Turkish president.