From psychology to pathology, our columnists break down the CBRT interest rate cut
Ireally do enjoy the title of the article. In fact, the expression “horses are put before the cart” is more valid in this case. However, the expression “putting the cars before the horses” evokes the idea of the duty being done contrary to a conventional way. That is to say, it means putting off the assignment that needs to be done primarily and thereby beginning the assignment from reverse. Now, there is a similar situation going on: the totality of the political economy is faced with the risk of sinking into oblivion and only the monetary policy path is put forward.
The March 31 elections and the addition June 23 Istanbul Metropolitan Municipality elections are over. With the appeal of no elections for the next four years, now it is time to work on regulations re
garding the economy. But more than one month has passed. Once again, there are no efforts or news on structural or integral adjustments regarding the economy.
During this period, former Central Bank Governor Murat Cetinkaya was the one who lost. He was discharged on the accusation of not being compatible with the government. We continued to take our chances between Murat Uysal and Murat Cetinkaya and hoped for a rate cut from the new governor and the Monetary Policy Committee. Along with the rate cut, a serious economic policy tool or armament was used.
The rate cut will reduce the deposit rates and thus this will cause a decrease on the credit rates. It will be followed by a seasonal or on-demand fall on inflation. In this case, will the decrease on interests and inflation be permanent? Will the exchange rates stay the same?
Hence, we will have used an important tool and will be out of bullets, so to speak.
In fact, when you think of it, it is better to form a reliable political and technocrat team and develop an economic program afterwards. Wouldn’t structural adjustments regarding education, justice and agriculture take the priority for the economic policies to operate efficiently? Wouldn’t it be better to put the two main components of economic programs, the fiscal and monetary policies, in action as integrated and assisting one another?
For instance, would it be right to state that expenses, taxation and borrowing, thereby the budget policy, operates efficiently? Is it possible to truthfully state that fiscal policies exist today and are implemented efficiently? When businesses complain about the unfair and inefficient tax regime, contractors can’t get a fair compensation for the past 7 months and the government can’t even carry out rent, advance and subsistence payments, is it possible to recognize a healthy fiscal policy?
Nowadays, it is a fact that absolute monetary policies fall short and without a doubt need to be implemented in accordance with fiscal policies, and that monetary and fiscal policies only operate efficiently through an appropriate ecosystem. Consequently, if we refer to the beginning of this article, we have put the cart before the horse by putting off the top priorities and putting lower priorities to the front.