Economy in Turkey: Expert says policy interest rate below 40 percent will not have a permanent effect

After the election in Turkey, Mehmet Şimşek was appointed to the Ministry of Treasury and Finance in order to recover the economy. Thus, it was targeted to ‘normalize” economic policies in the country. It is also known that Şimşek wants staff suitable for his new approach. Accordingly, Hafize Gaye Erkan (a professional from USA) was appointed as the president of the Central Bank (MB).

After the formation of the new economic administration, the reports of foreign banks on the MB’s interest rate policy continue to be updated. Banks expect the MB to raise interest rates at the meeting on June 22.

JP Morgan, one of the major US banks noted that it was possible for MB to raise the interest rate by 25 percent at the June meeting. Deutsche Bank also announced that they expected the interest rate to be increased to 25 within a month or two. Goldman Sachs also stated that the ideal interest rate is 40 percent.

“WE NEED TO WAIT AND SEE”

An economist in Turkey stated that if the interest rate were increased to 25 percent, ‘negative real interest rates would continue to be given and a policy rate below 40 percent would not have a permanent effect’.