One of my greatest childhood pleasures was the Clockwork Education Calendar, which my mom kept on the wall. “Today in history” had to read the chapter These would be events that have been milestones in history but mostly forgotten …
Yesterday was such a day. A day that deserves to be included in the Education Timetable. Anniversary of a forgotten decision that underlies today’s economic problems …
Three years ago, on 6 July 2019, the President of the Central Bank “The man wasn’t listening” He was fired and the Central Bank was institutionally fired.
It has been a year since Turkey switched to the presidential system. In fact, Erdogan had already announced before the presidential elections in June 2018 that he would now personally conduct monetary / interest policy. A month before the election, he held a meeting with foreign investors in London. The British business newspaper Financial Times quoted Erdoğan’s words during the meeting as follows:
“The president, who hopes to be re-elected next month, is intent on controlling monetary policy more tightly, aside from his unequivocal opposition to a rate hike.”
It would be wrong to say that Erdogan did not interfere with the Central Bank and interest policy until that day. Durmus Yilmazwho later assumed the presidency of the Central Bank Erdem BasciIt is known that behind many of Turkey’s decisions were the interventions of the prime minister of the time, Erdogan.
But still the management of the economy before 2018 Ali Babacan And Mehmet Simsekwas in The AKP has followed an economic and growth policy based on concrete, rent and privatization from the beginning, but Erdoğan did not interfere much with monetary policy, especially with the Central Bank.
Everything changed after the 2018 elections. Driving the economy Berat Albayrak past. Less than a month before the elections Pastor Brunson The crisis exploded, the dollar began to rise. The Central Bank managed to stop the exchange rate boom by raising interest rates by 625 basis points. The day after the Central Bank announced its interest rate decision, Erdogan “I have patience” he would like to say.
The rise in inflation was kept in check by the Central Bank’s tight monetary policy and the decline started again in 2019.
Graph: inflation rates 2018 and 2019
When the summer of 2019 came, the dollar rate was TL 5.60 and its direction was downward. In a few months, a single inflation figure would surely have been seen, and it has been seen. (Inflation fell to 9.26% in September 2019.) Rate cuts were already expected to begin. On July 6, 2019, there was such an environment in the economy.
President of the Central Bank on 6 July Murat Cetinkaya He was fired from his post with a surprising decision. Quite known as close to power Murat Uysal appointed. President Erdoğan announced Çetinkaya’s dismissal at AKP group meeting, ‘‘I fired the head of the Central Bank because he doesn’t listen to words’ He explained.
On 6 July 2019, exactly three years ago, the Central Bank passed under the administration of President Erdogan, as it had been aiming for some time. Monetary policy was subordinate to the presidency. The following years would show how important this change was.
Murat Uysal, who succeeded Murat Çetinkaya, reduced the official rate from 24% to 8.25% in less than a year. Despite this, the dollar hasn’t risen for a long time. Despite the interest rate cuts, the dollar appears to be pegged at TL 6.85. In May 2020 it would be revealed that this was possible with a sale of $ 128 billion from the Central Bank’s reserves.
In the summer of 2020 the dollar exploded, quickly exceeding TL 7, 7.5 TL, 8 TL and 8.5 TL. Murat Uysal was sacked, Berat Albayrak resigned. But at the Central Bank, nothing would ever be the same again.
After a short pause, interest rate cuts resumed last September. In a context where countries of the world are raising interest rates due to approaching inflation, the Central Bank of the Republic of Turkey has reduced the official rate from 19% to 14% in a few months. President Erdogan believed that interest rates were the cause, not the result, of inflation. Furthermore “What happens to you now that Nass is in the middle”du.
Interest rate cuts would cause prices to explode, official inflation would reach 80% and unofficial inflation 180%.
The point that we have come: the reserves are low, the budget is exhausted, the debt burden is heavy, the institutions and teams are in place …
6 July 2019. One of the most critical days in recent history.