Two simple questions
These two questions need a reply after the Central Bank’s decision not to raise interest rates: If monetary policy is tight enough, why do we think inflation is around 15 percent, and apparently increasing? If this policy is not sufficient, why was the interest rate not increased? The Central Bank drew attention to inflation after the Monetary Policy Council meeting. “The risk is rising,” the bank said, “pricing behavior is deteriorating.” However, the Central Bank clearly finds the existing monetary policy “tight enough” to not tighten it even more: “In this context, the council has considered that tight monetary policy may need to be protected for a long period of time.” Following the decision of the Central Bank, the Turkish lira experienced a severe depreciation. If the interest rate was increased by 0.75, or even one, points loan interests would still not have been at unworkable levels. Interest is already at 25 percent; would 26 percent have made any difference? We kept the price fixed, we did not care about the increasing exchange rate, we made our choice in this direction.