The head of central bank, who was only recruited this month has made a decision to increase interest rate by 6.5%. The decision marks the first rise in interest rates since December 2020, after a turbulent period in which three central bank governors were fired in less than two years, as they sought to stick to orthodox economics.
Although the increase almost doubles Turkey’s policy rate to 15%, it is far less than many economists had forecast. US-based investment bank Morgan Stanley had suggested it would go up to 20%, while Goldman Sachs said it could hit 40%.
In its statement the bank’s monetary policy committee made clear that Thursday’s move was the start of a gradual process, with the target of bringing inflation down to 5%.
Its members said they had “decided to begin the monetary tightening process in order to establish the disinflation course as soon as possible… and to control the deterioration in pricing behaviour”.
President Erdogan’s problem is that Turkey’s inflation rate remains stubbornly high and its central bank’s reserves have fallen to critically low levels, after it spent billions of dollars trying to prop up the lira.
Interest rates have come down from 19% two years ago to 8.5% in recent months and the change in direction will have repercussions for a country already in economic crisis.It is a risk, but it’s a difficult circle to square,” says Ozge Zihnioglu, senior politics lecturer at the University of Liverpool.
Erdogan “has to do something for the economy, but a clear shift to orthodox economic policies would hit a large section of society and he wouldn’t want to have that impact on local elections” next year.
Turkey’s economy grew dramatically in the early years of President Erdogan’s leadership. But in recent years, he has ditched traditional economic wisdom by blaming high inflation on high borrowing costs and seeking to stimulate economic growth.announced that they will hold a consultative meeting at Kamukunji grounds in Nairobi next Tuesday, following the passing of the controversial Finance Bill 2023.
“We have decided to invite Kenyans to a consultation at the Kamukunji Grounds next Tuesday, the 27th, at 10 a.m., where the next course of action will be decided,” said the Azimio One Kenya co-principal Martha Karua.
The Azimio Coalition claimed that the Kenya Kwanza administration disregarded the people, their feelings, fears, and hopes by imposing their agenda on them through the passage of the Finance Bill.
The Azimio coalition has previously organized protests to voice their concerns over the high cost of living and the prices of commodities.
