How would the loans be repaid without inflation?


✔ The main reason for the interest rate cut, which began in September last year, is to ensure that the gears of the economy are spinning and loan yields continue. Thus inflation has become the oil of the gears.

✔ But of course, keeping interest rates low and inflation has side effects. Like the risk of popping bubbles from the weak point of the over-inflated balloon … Here is the latest BRSA decision as a precaution against the bubbles noticed …

Do you still believe that the interest rate cut, which began in September last year, can be explained by how it was claimed? Of course, anyone can think what he wants. Or, what is our measure when we determine that a certain level of interest is unacceptable and religiously prohibited and that an interest below a certain level falls outside the scope of the prohibition? Let’s take a measure; Who determines this measure?

We have issued three exemplary decisions of the Central Bank’s Monetary Policy Committee. If last year’s decision is explained by how, on what do we base the two previous statements?

Our article on what was said about interest in three meetings of the Monetary Policy Committee can be found in the boxes in the appendix. To keep it in a corner of our mind, let’s give a summary of what kind of explanation was made in those days.

Now we need to look for answers to the following questions:

“While there was a sharp increase, not to mention the interest rate cut, what happened last year, why was the interest rate cut? In addition, this discount was constantly maintained. So what happened that the interest rate wasn’t lowered further in the six months of this year? ”

Don’t you think there is something strange?

In the fall of 2018, we raised the interest rate from 17.75% to 24%.

In November 2020, this time we increased the interest from 10.25% to 15%.

Wasn’t it there then?

In September last year, we cut the interest rate from 19 percent to 18 percent; We continued the discount and stopped when it hit 14%. Why did we stop at 2pm?

While the results are in …

While it is clear how the rise in foreign currency has stopped following interest rate hikes in 2018 and 2020 and how it has reversed the direction of inflation, it is clear that what needs to be done should be an increase in interest rates. interest according to the trend, so why did we make a reduction even though there is no increase?

It would be underestimating what was done to see last year’s rate cuts, which pushed the exchange rate and inflation, just as a wrong choice, a wrong step.

The decision to cut the interest rate last year was a decision made knowingly and voluntarily, and although it was hoped that it did not reach this level, it was a poorly predicted decision that would lead to what is happening today.

In the past, when there was an increase in the exchange rate and inflation has risen, he preferred to fight these problems by raising the interest rate, because an administration that did this would have preferred the opposite, there is an explanation for this. ?

Of course, every decision has an explanation. You also have this choice …

Inflation has oiled the gears!

A former treasurer friend of mine sat down and pondered this issue, as he always does, and pulled the data. In his note he says:

“Households and businesses have borrowed a lot from banks in recent years, but this debt hasn’t been invested, the money has mostly gone to consumption, and that’s how the economy has grown. Credits taken for energy privatizations and PPP projects are the main reasons for this increase. Let’s not forget the loans disbursed during the Covid epidemic “.

Drawing attention to the fact that 141 billion lire of special government bonds have been granted to public banks in recent years, thus facilitating the disbursement of loans by public financial institutions, my friend the treasurer goes on as follows:

“However, every loan granted has a repayment. Problems with the refund have arisen. If borrowers cannot repay the loan they have taken or have little intention of paying, interest rates should not be high to take out new loans or to restructure the loan.

Let’s get to the crux, the information in the note is very important:

“If you can easily reflect your costs on your prices, that is, if inflation is high, for example, it is very smart to take out a loan with an interest of 30%. For example, when inflation is 70 percent, you sell your product for $ 100 for $ 170, but pay back the $ 100 loan as $ 130.

Now we understand better, right, why the interest rate was lowered?

How the wheel would turn if interest were not reduced and there was a problem in repaying these loans; Wouldn’t it be much more expensive to keep banks afloat, especially public banks?

The problem is, that’s all!

Falling interest rates and the resulting increase in exchange rates and inflation have acted as a lubricant for the wheels. After all, as we wrote yesterday, the Minister of Finance Nabati “We preferred production, growth and employment” This is the reasoning behind his statement:

“There was inflation, but at least the wheels were turning!”

The millions are under this inflation, you know, there is a concept called training victims in the army, these millions are the victims of turning the wheels!

But the system doesn’t work perfectly. You know, when you inflate the balloon too much, even if it doesn’t burst, another bubble pops up, and to avoid it, every now and then you try to invent an escape route. Like the KKM, like the latest regulation of the BRSA …

What will happen when these and similar ways run out?

Let’s run until the election!



The trend in the inflation outlook has highlighted significant risks in terms of price stability. Due to exchange rate fluctuations, price increases are generalized on the basis of the sub-items. Despite the weakening of domestic demand conditions, the deterioration in price developments continues to represent an upside risk for the inflationary outlook. In this context, the Committee decided to implement a strong monetary tightening to support price stability.

Conclusion; The official rate was raised from 17.75% to 24%.


The delayed effects of TL depreciation, rising international food prices and worsening expectations negatively impact inflation outlook. November data points to an increase in inflation due to recent exchange rate volatility. Consequently, the Committee has decided to implement a clear and strong monetary tightening in order to eliminate the risks relating to the inflationary outlook, to keep inflation expectations under control and to re-establish the disinflation process as soon as possible.

Conclusion; The official rate was raised from 10.25% to 15%.


Rising food and import prices, supply-side factors, rising administered / direct prices and trends in demand are all effective in rising inflation. These effects are due to accidental factors. The Committee evaluated analyzes aimed at breaking down the effects of demand factors, core inflation trends and supply shocks that may be influenced by monetary policy. In this context, the need for an update of the monetary policy stance was assessed and it was decided to reduce the reference rate.

Conclusion; The official rate was lowered from 19% to 18%.


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