Turkey’s central bank has suspended it, leaving unchanged interest rates | Business and Economic Affairs

The central bank of Turkey voted for a slow retirement that began in September and saw the destruction of the lira.

Turkey’s central bank has terminated its recent policy-making agreement by maintaining a fixed interest rate, suspending a slowdown in last September, which economists warned was destabilizing the country and undermining the bank’s confidence in inflation.

The central bank on Thursday voted to raise interest rates by 14 percent. The move was highly anticipated after lowering interest rates at the end of last year when Turkish President Recep Tayyip Erdogan reduced interest rates by 5 percent and triggered a run of currency that devastated Turkish currency.

Erdogan insists that lower lending slows inflation – a notion that strongly contradicts the economic theory that low interest rates lead to higher inflation.

The bank said on Thursday it had decided to keep prices low due to “increasing global threats”, based on ongoing tensions between Turkey and NATO and Russia allies in Ukraine.

Rising prices and loyalty

The Turkish people have been struggling with rising prices for goods and services, including basic necessities such as food and fuel.

The central bank said it was continuing its efforts to raise interest rates of 5 percent. This is a long journey. Turkey’s inflation rate rose 36 percent in December – the highest level in nearly 20 years. Independent tests have a rise in inflation to 83 percent.

Prior to Thursday’s meeting, Erdogan pointed out that central bank policymakers could stop the latest developments, saying that while they want interest rates to fall, they are now urging them to fall “slowly and without haste.”

Erdogan has ousted three central bank officials over the past two years and handed out pink papers to other financial policy makers – which damaged the credibility of the central bank in the eyes of foreign investors.

Late last year, Erdogan appointed Nureddin Nebati as finance minister. Nebati, a staunch supporter of the so-called unstable Turkish economic system, has reiterated Erdogan’s promises that inflation will begin to decline this year and enter the same number by 2023 as voters are expected to go to the polls for presidential and parliamentary elections.

But many Turkish economists are predicting that inflation rates will rise by 50 percent this year as long as the central bank raises interest rates.

Erdogan said Turkey was in the “war on an independent economy” against international militias using the Turkish Lira currency. The lira lost 44 percent of its value against the US dollar last year, down from 18 lire to $ 1 in December.

It has also gained some value since Turkey announced its approach to securing Turkish lira banks.

Economists have questioned how the government will pay for the program, as the central bank’s foreign exchange rate plummeted in recent months as it intervened in foreign exchange markets in an effort to end it.

This week, Turkey signed a three-year $ 5bn exchange agreement with the UAE, and Ankara is currently negotiating with Azerbaijan on a $ 1bn foreign exchange transaction from Baku. Turkey already has similar agreements with Qatar, China, and South Korea, valued at about $ 23bn.

However, while Turkish foreign exchange reserves stood at about $ 110bn earlier this month when loans were laid, it is worse than $ 56bn – the lowest in 20 years.