Former Central Bank Chief Economist Hakan Kara has warned: Interest will no longer save

Former Central Bank Chief Economist Hakan Kara has warned: Interest will no longer save

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The interest rate situation in Turkey and its effects on inflation and exchange rates continue to be discussed. Hakan Kara, the former chief economist of the Central Bank, said in an interest policy statement on his social media account: “The interest rate may not be the solution on its own. without being backed by a holistic program, but not because the interest rate is inefficient, but because the exhaust is kept clogged for a long time with unnecessary persistence.” makes his comment.

Interest rates, the rise in the exchange rate and the inflationary spiral continue to affect the Turkish economy. It is believed that maintaining high interest rates will have an effect on lowering inflation and increasing the value of the TL. President Tayyip Erdogan, on the other hand, to reduce inflation He says interest rates should go down.

Former Central Bank Economist Prof. Dr. Hakan Kara pointed out that raising interest rates will no longer solve the problem. Kara, comparing the situation of the Turkish economy to a car, said: “If the clogged state of the exhaust gases (monetary policy) lasts for a long time, even if you open the pipe (raise the interest rate) after At some point, you won’t be able to go back to the old situation.” said.

Kara’s statements are as follows:

Yes, monetary policy alone cannot fix the economy, but overriding monetary policy alone can devastate the economy.

In modern economies, neutralizing monetary policy is like plugging the exhaust pipe of a car. If the vehicle continues to be used in this way, the engine will overheat. For example, the cylinder gasket may burn out, if it continues persistently, the engine may eventually become inoperable.

IF THIS CONTINUES, THE DAMAGES WILL INCREASE

If the clogging of the exhaust (monetary policy) lasts for a long time, even if you open the pipe (raise the interest rate) after a certain point, you cannot return to the old situation. Because the engine was destroyed, a complete replacement of parts or a complete replacement is necessary.
We are in the heat phase right now. If you continue like this, the damage will be more and more important.

So yes, interest alone may not be the solution anymore without being supported by a holistic program, but that’s not because interest is ineffective, but because the exhaust is blocked for a long time with a unnecessary persistence.



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