BY ALAATTIN AKTAS
Did we make a mistake in September, October, November, and December if now we are admitting that the interest rate cuts had negative results?
Why didn’t we reduce the policy rate in February if interest rates are a good thing?
I won’t say when this was, and under which government, but there was once an event at the Central Bank’s (CB) social facilities in Ankara. The CB Governor was deep in conversation with other officials. I approached them. “We change expressions used in our statements slightly,” he said, “We merge some phrases or separate them. People can then try to interpret this,” the CB Governor said. I understood that the statements made following Monetary Policy Committee (PPK) meetings were being discussed. I don’t know if this approach was maintained afterward. But I always remember that day when I read the CB’s PPK statements. Is there any need to interpret the February PPK statement? Does the CB have any function with regards to the interest rate? Does this statement even necessitate an interpretation?
It’s pointless now to ask the CB a question about the policy rate or other issues, as the CB isn’t able to make decisions by itself.
So? Was the February decision to keep the interest rate steady made by the CB? Treasury Minister Nureddin Nebati alluded long before that the policy rate would remain steady for three months. Moreover, didn’t Nebati state that the bank had deemed the policy rate unimportant?
The policy rate was kept steady at 14%. The CB’s statement could be valuable if we could assume the bank made the decision by itself. But we can’t. They just used the same expressions as January.
Moreover, the CB already reneged on its word – it said it wouldn’t lower the interest rate until inflation falls, but then started the policy rate cuts suddenly last year.
That’s because the decision maker is not the CB. It’s therefore meaningless to try and understand what the CB is saying in its interest rate statements.
We were supposed the lower the interest rate and thereby decrease inflation. What has happened to this theory?
Have we given up in the fight against inflation?
We can’t abandon it.
The value-added tax (VAT) has been reduced, there are continuous price and price marking audits, but why don’t we fight against inflation by reducing the interest rate and cutting corners, as the government believes we should? We already fought against it in September, October, November, and December. I guess we can say it’s unfortunate that the interest rate cuts backfired prices increased. But never mind! Maybe it’ll be useful one day! Or so the government wants us to believe.
So the question remains, what happened in January and February that halted the rate cuts?
