Türkiye: Returning to interest hikes didn’t help the economy and the currency

While the exchange rate of the Turkish Lira, reached 28 per $1, and the exchange rate of the Euro is nearly 30 Turkish liras, expectations continue for a continued decline in the price of the Turkish currency and an increase in the annual inflation rate.

As a result, the results of government measures will be postponed until the second half of next year, as Turkish Vice President Cevdet Yılmaz said.

Despite the adoption of the high interest policy again, and the satisfaction of the interest lobby inside and outside Türkiye, experts expected that the inflation rate at the end of this year would reach 68.01% and that the value of the US dollar would exceed 30 Turkish liras.

The survey recently issued by the Turkish Central Bank, based on the opinions of 70 participants from the private sector and representatives of the financial sector and professionals, indicates a rise in the consumer price index within 12 months from 44.94% to 45.28%, high inflation, and a decline in the price of the Turkish currency to more than 30 liras against the dollar at the end of the year, and it declined after 12 months from 37.26 Turkish liras to 38.64 Turkish liras.

This contradicts the words of Turkish Vice President Cevdet Yılmaz, who indicated that all data indicate that inflation in the country will begin to decline in a stable manner, starting from the second half of next year 2024.

Yılmaz added, during his participation last week, in the meeting of the Planning and Budget Committee in the Turkish Parliament in the capital, Ankara, “We expect to enter into a permanent slowdown in inflation starting from the second half of 2024, thanks to the positive effects of our transparent and reliable political steps”.

At the same time, he stressed that the Turkish government will continue to use all policy tools decisively until inflation falls to permanent, low single-digit levels, to achieve permanent stability in the economy through an approach based on financial discipline, strengthening the coordination of financial and monetary policies, and structural reforms.

The Turkish Statistics Authority indicated that the inflation rate rose to 61.53% on an annual basis this October, despite the Central Bank raising the interest rate to 30%.

As for the Governor of the Central Bank, Hafiza Ghaya Arkan, she justified the reasons for the increase in inflation by the rise in global oil prices and its impact on production prices.

She indicated during her speech before the Planning Committee of the Turkish Parliament that the Central Bank has used and will continue to use all tools firmly, in line with the main goal of price stability.

She revealed that the process of monetary tightening had begun in a strong and decisive manner since last June, with the aim of strengthening the monetary transfer mechanism and enhancing financial stability.

Arkan added that the Central Bank’s policy is focused on combating inflation and achieving sustainable growth as soon as possible, and the steps taken show our determination to restore confidence and stabilize expectations and predictability in the economy.

The rise in prices and the decline in the exchange rate of the Turkish currency increased the difficulty of living conditions in the country, despite the attempts of the ruling Justice and Development Party government to increase wages in proportion to inflation, every six months.

The poverty level in Türkiye last September continued to rise, according to a study issued by the General Federation of United Business in Türkiye.