Both the interest rate and foreign exchange (FX) rates will fall, according to President Recep Tayyip Erdogan. Speaking to journalists following his visit to Albania, President Erdogan again brought up his theory that high interest rates cause inflation. “Inflation has started to decline and will decrease. December 20 was a milestone for this. Waiting for inflation to fall is the right of people and our goal, which we’ll achieve,” Erdogan noted. Discussing the interest rate, Erdogan stated that the policy rate will gradually be reduced. “The interest rate, which fell to some 12%, had been raised again. But we’ll lower it. This will be shaped in line with the economic conditions. The policy rate will gradually decrease without being impetuous and so will the FX rates. This will bring a decline in inflation,” Erdogan added. The government announced new economic measures including the FX-protected TRY deposit account on December 20, 2021 to prevent TRY devaluation.
The Economic Coordination Board convened under the presidency of Vice President Fuat Oktay. The real GDP (Gross Domestic Product) surge is estimated to exceed 10% for 2021 as domestic and foreign demand made a positive contribution to growth in the first quarter (Q1) of 2021 and a growth trend continued in Q4 last year, according to a statement following the meeting.
The board discussed the new Economic Model, inflation, and its determinants at the meeting. Within the frame of the model, developments after December 20 and steps that will be taken in the short and long term were on the agenda. Developments in line with the model will continue to be implemented and the results of these implementations will be monitored, according to the statement. “The pressure of costs on the level of prices and the impact of FX rate transitivity was evaluated. Within this frame, the measures to be taken for 2022 were discussed,” read the statement.
Sales on the Borsa Istanbul stock exchange accelerated on Tuesday afternoon. Borsa Istanbul’s BIST 100 Index fell by 5.08% to 1,979 yesterday from the previous close. There has been no adverse development reflected on the market, according to analysts. However, they say the 8% loss on the Russian stock exchange due to tensions with Ukraine might be reflected on the domestic market and levels may decrease.
DAILY AGENDA
No important data will be released today.
President Recep Tayyip Erdogan will attend the local authorities meeting (2.00 pm).
The Cabinet will convene under the presidency of President Recep Tayyip Erdogan (4.00 pm).
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>> Developments that please Ankara in the Eastern Mediterranean
The U.S. administration, in a diplomatic note sent to Greece, stated that it does not support the Eastern Mediterranean oil/natural gas pipeline project (the East-Med Pipeline Project) pioneered by Israel, Greece, and Cyprus, excluding Turkey. Our Foreign Policy Columnist Zeynep Gurcanli analyses the reasons behind this development.
