When the CBRT Monetary Policy Committee increased the repo rate to 25 percent and signaled that it could increase interest rates while maintaining the tight monetary policy in the new period, I frequently asked myself how long President Erdogan would tolerate this attitude contrary to his rhetoric. The subject comes up frequently in dinner table chats nowadays.
As in previous dismissals, I asked an industrialist friend of mine whether President Erdogan will repeat “I said lower the interest rate, they disobeyed, I fired them” for Hafize Gaye Erkan before the local elections this time, and the comprehensive answer I got was:
“The Şimşek team came were appointed with the promise of returning to rational policies. They announced 58 percent year-end CPI, raising Central Bank’s year-end inflation forecast. In the first MPC meeting, they increased the interest rate, and continued the increase in the other meetings. While stating that the tight monetary policy will continue in their statements, they also gave the signal for new interest rate hikes. While our country’s CDS premium was 700 points in May, it has decreased to 383 points today.
Seeing that they could not get the desired result in investment and loan demands from Saudi Arabia and the Gulf countries, they decided to seek funds from the West. Şimşek will go to the United States and convey the developments on issues such as interest rate hikes and request investment and capital inflows. He will also explain the developments regarding the EU and explain that we are now re-anchoring to the West.
This being the case, President Erdoğan will not interfere with the political-economic decisions of the Mehmet Şimşek team due to necessity”.