Turkey prepares for a radical shift in economic policy

Turkey prepares for a radical shift in economic policy
Photo by Meg Jerrard / Unsplash

Turkey's central bank may raise interest rates to 40 percent

Such a decision would be a radical change in economic policy in recent years. Experts are ready for unconventional steps amid a change in economic leadership following the presidential election in which Recep Tayyip Erdogan retained his post.
The long-serving Turkish leader has repeatedly promised that as long as he remains in power, rates will only go down. He holds an alternative economic view, according to which lower rates lead to lower inflation.
Globally, the view is that the opposite is true and what is happening in Turkey confirms this view. The Turkish lira was trading below 23.6 lira to the dollar on the morning of Tuesday, June 20. It has become the world's most devalued currency in the last ten years, with the exception of the Venezuelan bolivar, which is in continuous hyperinflation.

4 January 2022
Erdogan has previously sacked several central bank heads to pursue his own economic policies. Now, however, Mehmet Simsek, a former Merrill Lynch strategist who was previously in charge of the agency and has only agreed to return under certain conditions, has taken over as head of the Finance and Treasury. In addition, Hafize Gaye Ercan, a Princeton graduate, a former Goldman Sachs employee and Turkey's first woman in the position, has been appointed to head the central bank.

The new economic bloc is expected to return to more traditional policies, including on the rates issue. Most experts believe they will raise the rate to 15-20 per cent at the first meeting, but some analysts believe that a hike of twice as much will be more effective in reviving foreign investment.