Türkiye is the 19th biggest economy in the globe, having a GDP (Gross Domestic Product) of approximately 906 billion dollars. However, with the decreasing value of the national currency, Turkish Lira, it is becoming more and more challenging to maintain a stable economy. During the efforts to stabilize Türkiye’s economy, fluctuations in GDP, inflation, interest, and unemployment rates are detected due to their prominent impacts on citizens’ daily lives as well as on the circulation of the financial system. Therefore, government officials in charge of administrating economic processes have to make their decisions meticulously in order to not trigger catastrophic consequences in the national economy. One of the major topics of discussion for government officials is the “interest rates” that shape the geometry of the economy, meaning the distribution of labor and resources. Interest rates determine the industries that are going to shrink and strengthen in the state of affairs. The Central Bank of Türkiye has recently been making new decisions on its interest rate policies.
On 23rd November 2023, the Central Bank of the Turkish Republic (TCMB) increased the policy rates by 500 basis points (0.01 percent in economics), which was above the market expectation. Not only national economists but also foreign economic constitutions such as JPMorgan, Morgan Stanley, and SocGen had made forecasts claiming that the basis points will increase by 250. As a result of the 500 basis-point increase, the interest rates resulted in 40%. In the resolution text, the Central Bank stated that tight monetary policies will be taken as swiftly as possible. The decision made by the Central Bank was highly unexpected, raising concerns about how the alteration in the interest rates affects the economic status quo.
Reactions from the public didn’t delay the pivotal increase in interest rates. Meral Akşener, the chairman of the İYİ Parti (Good Party), raised her and her party’s voices against the Central Bank and President Recep Tayyip Erdoğan in the General Assembly meeting of the Good Party. She said, “We have warned the governing party AKP (Justice and Development Party) and Erdoğan multiple times not to interfere with the Central Bank. By ignoring all of our warnings and precautions, they are still continuing their unsteady actions. These actions are causing inflation to reach record highs, and the people of Türkiye to suffer with the Turkish Lira, losing its value constantly.”
Another reaction arose from the vice president of CHP (People’s Republican Party), Burhanettin Bulut. In his speech during the CHP General Assembly Meeting, Bulut warned people not to take Erdoğan’s encouragement as investment advice and alleged that Erdoğan has been tantalizing the people of Türkiye with his meaningless talks. Recalling Erdoğan’s past statement about the US Dollar, “Those who invest in dollars may be left on their feet,” Bulut emphasized that the value of the USD has increased remarkably after Erdoğan’s speech, passing 26 Turkish Liras.
500 basis point increment rates weren’t the only time the Central Bank interfered with the interest rates by increasing them. Both in September and November, the Central Bank declared the 500 basis points increase. Nevertheless, the largest increase was carried out in the August meeting which brought along aggressive applications of tight monetary policies. In spite of the Central Bank’s decisions to increase the interest rates, President Erdoğan has always stated that they will be decreasing interest rates for the comfort and the sake of the people of the Turkish Republic. He even has a famous saying that is always used to refer to his approach to the issue, “Interest is the reason, and inflation is the result.” Contrary to what Erdoğan has been saying, interest rates have been increasing notably for 3 months.
Many people are now wondering what will happen to the interest rates, USD, and most importantly, the Turkish Lira. Experts are trying to answer numerous questions about the future of Türkiye’s economy. Some experts, including financial analyst and economist Haluk Bürümcekçi, claimed that the Central Bank could conclude the interest rate increase process by increasing it to 45 percent in December. Although they don’t know how yet, Turkish citizens are aware of the fact that they will be impacted by the abrupt changes. Their only wish for now is to be affected as little as possible.
Works Cited
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