Will there be another interest rate cut? President Erdoğan gave the first signal.

The President of the Central Bank of the Republic of Turkey, Fatih Karahan, announced during the presentation of the Fourth Inflation Report for 2024 that the year-end inflation forecast has risen to 44%. The forecasts for 2025 and 2026 have been set at 21% and 12%, respectively. The year-end inflation forecast, which was announced as 34% in the first report, was raised to 38% in the second report. The updated forecast for the end of 2024 has been determined as 44%. Karahan stated that inflation would decline to 21% and 12% levels in 2025 and 2026, respectively.

"INFLATION WILL FALL ALONG WITH INTEREST RATES"

Following Karahan's statements, a noteworthy assessment regarding the economy also came from President Erdoğan. Answering journalists' questions about current issues on the plane returning from his visits to Kyrgyzstan and Hungary, Erdoğan stated that inflation would begin to decrease, saying, "You know my approach. God willing, inflation will fall along with interest rates. You should not have any concerns about this. This is my logic in the economy. This is the information I have received and learned as an economist."

"WE WILL SEE DECLINES IN THE LAST TWO MONTHS"

Erdoğan, who believes that inflation will continuously trend downward, stated, "No one should have any doubts about this. We will all see these declines in inflation in the last 2 months. Remember, during the time when Mehmet Bey was again the Minister of Finance, interest rates were at around 4%. Inflation had dropped to 5.6%. Now, we will hopefully bring this back to the agenda of our country. This positive trend will continue with the implementation of a stable fiscal policy and structural reforms," he said.

"INTEREST IS THE CAUSE, INFLATION IS THE RESULT"

In July and August 2021, the policy interest rate remained at 19%, but despite inflation rising to 19.25% in August 2021, the policy interest rate was reduced to 18% in September 2021. President Recep Tayyip Erdoğan stated during his party's group meeting on November 17, 2021, "Interest is the cause, inflation is the result. Those among our friends who advocate for interest, I apologize. I cannot and will not be with those who advocate for interest on this path. The Quran is clear. If the Quran is clear, what does it matter to you and me?"

In line with Erdoğan's statements, the understanding that interest rates should remain below inflation was adopted. However, following interest rate cuts, prices rapidly increased, leading Turkey into a period of high inflation.